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Should Lincoln Electric Be in Your Portfolio Right Now?

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We issued an updated research report on Lincoln Electric Holdings Inc. (LECO - Free Report) on Jun 15, 2016. The company is poised to gain from continuous focus on cost reduction, acquisitions, strength of its product pipeline and new launches. However, foreign exchange headwinds, weakness in the oil and gas sector and industrial demand remain headwinds for Lincoln Electric.

Lincoln Electric’s short-term initiatives are focused on reducing the impact of current end-market conditions and maintaining the cost-reduction actions outlined in 2015. These actions will aid growth in the second quarter. The company continues to remain focused on customers and executing its 2020 vision and strategy.

Notably, Lincoln Electric continues to undertake initiatives to drive improved returns through acquisitions. In Aug 2015, the company acquired Rimrock. The buyout will help boost its heavy fabrication capabilities and expand its presence in the Western region of the U.S. Additionally, the company acquired SWP to expand its presence and specialty alloy offering.

Recently, Lincoln Electric acquired Vizient Manufacturing Solutions. The buyout will help in diversifying the company’s end-market exposure in addition to expanding growth opportunities globally. Vizient’s system-design capabilities will also complement its current offering. The company also remains optimistic about the strength of its product pipeline in 2016 and new launches for various segments.

However, Lincoln Electric remains cautious about demand trends for 2016, given the short-cycle nature of its business. The company also witnessed year-over-year strength in oil and gas, U.S. exports and strong billings in automation last year, which will hurt volume this year.

For 2016, the company expects some growth opportunities to emerge in several end markets, but remains concerned about the improvements being offset by the ongoing declines in the energy and heavy fabrication sectors until commodity prices get stabilized.

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

Stocks to Consider

Some better-ranked stocks in the same sector are Kennametal Inc. (KMT - Free Report) , ACCO Brands Corporation (ACCO - Free Report) and Sandvik AB (SDVKY - Free Report) . While Kennametal and ACCO Brands Corporation sport a Zacks Rank #1 (Strong Buy), Sandvik holds a Zacks Rank #2 (Buy).

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