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Lincoln Electric (LECO) Rides on Improving Demand, Buyouts
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Lincoln Electric Holdings, Inc. (LECO - Free Report) is benefiting from improving demand across its end markets. Acquisitions and focus on developing new products, and utilization of digital platforms to engage customers will continue to drive the top line. Further, the company’s cost control measures will boost margins.
Solid Q1 & Upbeat 2021 Outlook
On Apr 27, 2021, Lincoln Electric reported record first-quarter 2021 adjusted earnings of $1.37 per share, which beat the Zacks Consensus Estimate of $1.18. The bottom line also improved 37% year over year driven by the company’s strategic initiatives, cost reduction actions and recovery in its end markets.
Notably, 80% of first-quarter 2021 revenues were generated from growing end markets led by mid-teens percent organic sales growth in automotive and heavy industries where mining, agriculture, and construction equipment demand surpassed expectations. The company entered the second quarter with strong momentum and record order and backlog levels for equipment. This along with acquisitions are expected to benefit the company’s performance in the back half of the year. Lincoln Electric anticipates current-year organic sales growth in low to mid-teens percentage. Incremental margin is expected to average in the high 20% range for 2021, reflecting increasing volume levels and operating leverage. The Zacks Consensus Estimate for Lincoln Electric’s earnings for the ongoing quarter and 2021 have moved north by 14.7% and 9.9%, respectively, over the past 30 days.
The Zacks Consensus Estimate for the company’s earnings for second-quarter 2021 is currently pegged at $1.43, suggesting year-over-year growth of 79%. The estimate for 2021 stands at $5.61, indicating year-over-year improvement of 35%.
The company is committed to new product development and utilizing 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, which is a major growth prospect. The company is continuously evaluating acquisition options focused primarily on tuck-in assets, supporting its Higher Standard 2025 strategy.
Recently, Lincoln Electric acquired Zeman Bauelemente Produktionsgesellschaftm.b.H., a Zeman Group unit, to drive automation growth in structural steel applications. It will boost the company’s annual automation sales by around 10% and expand its international automation capabilities.
The company has been gaining from several buyouts made over the past few years. In 2019, Lincoln Electric acquired Baker Industries to expand automation and additive strategies. It also 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. Earlier, it acquired the soldering business of Worthington Industries, Inc. (WOR - Free Report) , which expanded the Harris Products Group’s portfolio of industry-leading consumables. The buyouts of Inovatech Engineering Corporation and Coldwater Machine Company, Pro Systems LLC, bolstered its automated cutting solutions and application expertise.
Lincoln Electric is also focused on its cost-reduction actions to sustain margins. After yielding cost-saving benefits of $88 million in 2020, the company anticipates incremental cost savings between $25 million and $30 million in the current year. It is also implementing pricing actions to mitigate raw material and freight inflation. Further, the company’s efforts to reduce the debt level is encouraging. Lincoln Electric has a balanced capital allocation strategy, prioritizing growth investment while returning cash to shareholders. As of Mar 31, 2021, the company had liquidity of $720 million. Its total debt to total capital ratio was 0.47 as of Mar 31, 2021 and its times interest earned ratio was 14.
Price Performance
Lincoln Electric’s shares have gained 60.8% over the past year compared with the industry’s growth of 25.3%.
Some other top-ranked stocks in the Industrial Products sector are Tennant Company (TNC - Free Report) and AGCO Corporation (AGCO - Free Report) . While Tennant sports a Zacks Rank #1, AGCO carries a Zacks Rank #2 at present.
Tennant has a projected earnings growth rate of 49.5% for fiscal 2021. Over the past year, the company’s shares have surged 45%.
AGCO has an estimated earnings growth rate of 54.6% for the ongoing year. The company’s shares have soared 156% in the past year.
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Lincoln Electric (LECO) Rides on Improving Demand, Buyouts
Lincoln Electric Holdings, Inc. (LECO - Free Report) is benefiting from improving demand across its end markets. Acquisitions and focus on developing new products, and utilization of digital platforms to engage customers will continue to drive the top line. Further, the company’s cost control measures will boost margins.
Solid Q1 & Upbeat 2021 Outlook
On Apr 27, 2021, Lincoln Electric reported record first-quarter 2021 adjusted earnings of $1.37 per share, which beat the Zacks Consensus Estimate of $1.18. The bottom line also improved 37% year over year driven by the company’s strategic initiatives, cost reduction actions and recovery in its end markets.
Notably, 80% of first-quarter 2021 revenues were generated from growing end markets led by mid-teens percent organic sales growth in automotive and heavy industries where mining, agriculture, and construction equipment demand surpassed expectations. The company entered the second quarter with strong momentum and record order and backlog levels for equipment. This along with acquisitions are expected to benefit the company’s performance in the back half of the year. Lincoln Electric anticipates current-year organic sales growth in low to mid-teens percentage. Incremental margin is expected to average in the high 20% range for 2021, reflecting increasing volume levels and operating leverage.
The Zacks Consensus Estimate for Lincoln Electric’s earnings for the ongoing quarter and 2021 have moved north by 14.7% and 9.9%, respectively, over the past 30 days.
The Zacks Consensus Estimate for the company’s earnings for second-quarter 2021 is currently pegged at $1.43, suggesting year-over-year growth of 79%. The estimate for 2021 stands at $5.61, indicating year-over-year improvement of 35%.
Product Development, Acquisitions Remain Catalysts
The company is committed to new product development and utilizing 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, which is a major growth prospect. The company is continuously evaluating acquisition options focused primarily on tuck-in assets, supporting its Higher Standard 2025 strategy.
Recently, Lincoln Electric acquired Zeman Bauelemente Produktionsgesellschaftm.b.H., a Zeman Group unit, to drive automation growth in structural steel applications. It will boost the company’s annual automation sales by around 10% and expand its international automation capabilities.
The company has been gaining from several buyouts made over the past few years. In 2019, Lincoln Electric acquired Baker Industries to expand automation and additive strategies. It also 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. Earlier, it acquired the soldering business of Worthington Industries, Inc. (WOR - Free Report) , which expanded the Harris Products Group’s portfolio of industry-leading consumables. The buyouts of Inovatech Engineering Corporation and Coldwater Machine Company, Pro Systems LLC, bolstered its automated cutting solutions and application expertise.
Lincoln Electric is also focused on its cost-reduction actions to sustain margins. After yielding cost-saving benefits of $88 million in 2020, the company anticipates incremental cost savings between $25 million and $30 million in the current year. It is also implementing pricing actions to mitigate raw material and freight inflation. Further, the company’s efforts to reduce the debt level is encouraging. Lincoln Electric has a balanced capital allocation strategy, prioritizing growth investment while returning cash to shareholders. As of Mar 31, 2021, the company had liquidity of $720 million. Its total debt to total capital ratio was 0.47 as of Mar 31, 2021 and its times interest earned ratio was 14.
Price Performance
Lincoln Electric’s shares have gained 60.8% over the past year compared with the industry’s growth of 25.3%.
Zacks Rank & Other Stocks to Consider
The company currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some other top-ranked stocks in the Industrial Products sector are Tennant Company (TNC - Free Report) and AGCO Corporation (AGCO - Free Report) . While Tennant sports a Zacks Rank #1, AGCO carries a Zacks Rank #2 at present.
Tennant has a projected earnings growth rate of 49.5% for fiscal 2021. Over the past year, the company’s shares have surged 45%.
AGCO has an estimated earnings growth rate of 54.6% for the ongoing year. The company’s shares have soared 156% in the past year.
Infrastructure Stock Boom to Sweep America
A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made.
The only question is “Will you get into the right stocks early when their growth potential is greatest?”
Zacks has released a Special Report to help you do just that, and today it’s free. Discover 7 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale.
Download FREE: How to Profit from Trillions on Spending for Infrastructure >>