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Lincoln Electric (LECO) Q4 Earnings Surpass Estimates, Up Y/Y
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Lincoln Electric Holdings, Inc. (LECO - Free Report) reported fourth-quarter 2020 adjusted earnings of $1.24 per share, which beat the Zacks Consensus Estimate of $1.07. The bottom line also improved 8% year over year. This upbeat performance can be attributed to the company’s execution of strategic initiatives and cost reduction actions.
Including one-time items, the bottom line came in at $1.08 compared with $1.03 in the prior-year quarter.
Total revenues declined 5.8% year over year to $694 million. However, the top line surpassed the Zacks Consensus Estimate of $687 million. The decline in revenues was due to a decrease of 5.6% in organic sales and an unfavorable impact of 0.2% from foreign exchange.
Lincoln Electric Holdings, Inc. Price, Consensus and EPS Surprise
Cost of goods sold went down 6% to $465 million from the prior-year quarter. Gross profit fell 5% to $229 million from $241 million reported in the prior-year quarter. Gross margin came in at 33.0% compared with 32.7% in the year-ago quarter.
Selling, general and administrative expenses declined 9% year over year to $136 million from the prior-year quarter. Adjusted operating profit increased 1.5% year over year to $92.9 million in the quarter. Adjusted operating margin was 13.4% in the reported quarter compared with 12.4% in the year-ago quarter.
Financial Update
Lincoln Electric had cash and cash equivalents of around $257 million at the end of 2020 compared with $200 million at the end of the 2019. The company generated cash flow from operations of $351 million during 2020 compared with $403 million in the prior year.
The company’s debt to invested capital was at 47.6% at the end of 2020 compared with 47.7% as of the end of fiscal 2019.
2020 Results
Lincoln Electric’s adjusted earnings per share in 2020 was $4.15, down 12% from the prior-year’s figure of $4.70. However, the bottom line beat the Zacks Consensus Estimate of $3.97. Including one-time items, the company delivered an earnings per share of $3.42 in 2020 compared with $4.68 in 2019.
Sales decreased 12% year over year to $2,655 million from the prior-year figure of $3,003 million. Nevertheless, the top line surpassed the Zacks Consensus Estimate of $2,648 million.
Outlook
Lincoln Electric has witnessed improving order rates across all segments lately and thus expects first-quarter organic sales to be flat to modestly higher compared with prior year levels. Despite customer supply chain risks and uncertainties related to the COVID-19 pandemic, the company expects organic sales growth in the high single digits in 2021 backed by this current demand trends.
The company anticipates incremental cost savings between $25 million and $30 million in 2021 from its permanent cost actions. However, it anticipates inflationary headwinds in 2021 stemming from escalating labor, freight and raw material costs. While higher labor costs will be offset by the incremental cost savings, pricing actions will mitigate raw material and freight inflation. Lincoln Electric anticipates incremental margin to average in the mid to high 20% range for 2021.
Price Performance
Lincoln Electric’s shares have gained 25.0% over the past year against the industry’s decline of 8.8%.
Zacks Rank and Stocks to Consider
Lincoln Electric currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Industrial Products sector include AGCO Corporation (AGCO - Free Report) , Avery Dennison Corporation (AVY - Free Report) and Myers Industries, Inc. (MYE - Free Report) . While AGCO currently sports a Zacks Rank #1 (Strong Buy), Avery Dennison and Myers Industries carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
AGCO has an estimated earnings growth rate of 30% for 2021. The company’s shares have rallied 78% in the past year.
Avery Dennison has a projected earnings growth rate of 11% for the current year. Shares of the company have gained 28% over the past year.
Myers Industries has an expected earnings growth rate of 16% for the ongoing year. In the past year, the stock has surged 35%.
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Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by referendums and legislation, this industry is expected to blast from an already robust $17.7 billion in 2019 to a staggering $73.6 billion by 2027. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
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Lincoln Electric (LECO) Q4 Earnings Surpass Estimates, Up Y/Y
Lincoln Electric Holdings, Inc. (LECO - Free Report) reported fourth-quarter 2020 adjusted earnings of $1.24 per share, which beat the Zacks Consensus Estimate of $1.07. The bottom line also improved 8% year over year. This upbeat performance can be attributed to the company’s execution of strategic initiatives and cost reduction actions.
Including one-time items, the bottom line came in at $1.08 compared with $1.03 in the prior-year quarter.
Total revenues declined 5.8% year over year to $694 million. However, the top line surpassed the Zacks Consensus Estimate of $687 million. The decline in revenues was due to a decrease of 5.6% in organic sales and an unfavorable impact of 0.2% from foreign exchange.
Lincoln Electric Holdings, Inc. Price, Consensus and EPS Surprise
Lincoln Electric Holdings, Inc. price-consensus-eps-surprise-chart | Lincoln Electric Holdings, Inc. Quote
Costs and Margins
Cost of goods sold went down 6% to $465 million from the prior-year quarter. Gross profit fell 5% to $229 million from $241 million reported in the prior-year quarter. Gross margin came in at 33.0% compared with 32.7% in the year-ago quarter.
Selling, general and administrative expenses declined 9% year over year to $136 million from the prior-year quarter. Adjusted operating profit increased 1.5% year over year to $92.9 million in the quarter. Adjusted operating margin was 13.4% in the reported quarter compared with 12.4% in the year-ago quarter.
Financial Update
Lincoln Electric had cash and cash equivalents of around $257 million at the end of 2020 compared with $200 million at the end of the 2019. The company generated cash flow from operations of $351 million during 2020 compared with $403 million in the prior year.
The company’s debt to invested capital was at 47.6% at the end of 2020 compared with 47.7% as of the end of fiscal 2019.
2020 Results
Lincoln Electric’s adjusted earnings per share in 2020 was $4.15, down 12% from the prior-year’s figure of $4.70. However, the bottom line beat the Zacks Consensus Estimate of $3.97. Including one-time items, the company delivered an earnings per share of $3.42 in 2020 compared with $4.68 in 2019.
Sales decreased 12% year over year to $2,655 million from the prior-year figure of $3,003 million. Nevertheless, the top line surpassed the Zacks Consensus Estimate of $2,648 million.
Outlook
Lincoln Electric has witnessed improving order rates across all segments lately and thus expects first-quarter organic sales to be flat to modestly higher compared with prior year levels. Despite customer supply chain risks and uncertainties related to the COVID-19 pandemic, the company expects organic sales growth in the high single digits in 2021 backed by this current demand trends.
The company anticipates incremental cost savings between $25 million and $30 million in 2021 from its permanent cost actions. However, it anticipates inflationary headwinds in 2021 stemming from escalating labor, freight and raw material costs. While higher labor costs will be offset by the incremental cost savings, pricing actions will mitigate raw material and freight inflation. Lincoln Electric anticipates incremental margin to average in the mid to high 20% range for 2021.
Price Performance
Lincoln Electric’s shares have gained 25.0% over the past year against the industry’s decline of 8.8%.
Zacks Rank and Stocks to Consider
Lincoln Electric currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Industrial Products sector include AGCO Corporation (AGCO - Free Report) , Avery Dennison Corporation (AVY - Free Report) and Myers Industries, Inc. (MYE - Free Report) . While AGCO currently sports a Zacks Rank #1 (Strong Buy), Avery Dennison and Myers Industries carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
AGCO has an estimated earnings growth rate of 30% for 2021. The company’s shares have rallied 78% in the past year.
Avery Dennison has a projected earnings growth rate of 11% for the current year. Shares of the company have gained 28% over the past year.
Myers Industries has an expected earnings growth rate of 16% for the ongoing year. In the past year, the stock has surged 35%.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by referendums and legislation, this industry is expected to blast from an already robust $17.7 billion in 2019 to a staggering $73.6 billion by 2027. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot stocks we're targeting >>