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Lincoln Electric Hits 52-Week High: What's Driving the Stock?

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Shares of Lincoln Electric Holdings, Inc. (LECO - Free Report) scaled a fresh 52-week high of $99.00 during the trading session on Aug 31, before retracting a bit to close at $96.71. Forecast-topping second-quarter 2020 results, focus on new product development, successful acquisitions and cost-reduction actions have contributed to this rally.

The company has a market cap of $5.83 billion. It has an expected long-term earnings per share growth rate of 10%. The company has a trailing four-quarter average earnings surprise of 31.07%.

Lincoln Electric’s shares have gained 17.1% in the past year, outperforming the industry’s growth of 1%.

Earnings & Sales Beat Estimates in Q2

Lincoln Electric reported second-quarter 2020 adjusted earnings of 80 cents per share, which beat the Zacks Consensus Estimate of 34 cents. Revenues of $591 million also surpassed the Zacks Consensus Estimate of $556 million.

Driving Factors

The company is focused on new product development and using digital platforms to engage customers. Lincoln Electric’s product launches in the automation solutions market are likely to aid growth. Focus on its new additive services business will position the company as a manufacturer of large scale 3D-printed metal spell parts, prototypes and tooling for industrial customers. This is likely to be a significant growth opportunity for the company. It also continues to invest in a long-term strategy for automation in support of its 2020 strategy initiatives.

Moreover, the company launched its new state-of-the-art advanced technology solution center in Germany, which gives it an unprecedented commercial presence in the European market. This tech center will enable the company to showcase its latest technologies and welding consumables, equipment and automation.

Lincoln Electric is benefiting from several acquisitions. It has acquired Inovatech Engineering Corporation and Coldwater Machine Company, Pro Systems LLC, bolstering its automated cutting solutions and application expertise. In January 2019, Lincoln Electric acquired the soldering business of Worthington Industries. This broadened the Harris Products Group’s portfolio of industry-leading consumables with the addition of premium solders and fluxes. In April 2019, Lincoln Electric acquired Baker Industries to expand automation and additive strategies. Recently, the company acquired a controlling interest in Askaynak — a leading Turkish producer of welding consumables and equipment. The buyout advances the company's regional growth strategy in Europe, the Middle East and Africa.

The company is focusing on cost management to sustain margins in the backdrop of weak demand. Cost-reduction actions are now anticipated to provide benefits of $55-$65 million in the current year. Exiting 2020, the company expects to realize $8-$9 million in permanent cost savings per quarter.

Solid Estimate Revisions

The company’s earnings estimate for the current year is pegged at $3.60 per share and has moved 21.2% north over the past 60 days. Eight analysts have raised their earnings estimates for the current year, while none have revised their estimates downward during the same time frame.

Zacks Rank & Stocks to Consider

Lincoln Electric currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Industrial Products sector include Silgan Holdings, Inc. (SLGN - Free Report) , IIVI Incorporated (IIVI - Free Report) and SiteOne Landscape Supply, Inc. (SITE - Free Report) . While Silgan and IIVI sport a Zacks Rank #1 (Strong Buy), SiteOne carries a Zacks Rank of 2 (Buy), currently. You can see the complete list of today’s Zacks #1 Rank stocks here.

Silgan has a projected earnings growth rate of 28.7% for 2020. The company’s shares have appreciated 28.4% over the past year.

IIVI has an estimated earnings growth rate of 29% for the ongoing year. The company’s shares have gained 18.1% in a year’s time.

SiteOne Landscape has an expected earnings growth rate of 15.4% for the current year. The stock has surged 61.6% over the past year.

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