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Lincoln Electric (LECO) Rises 56% in a Year: What's Driving It?
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Lincoln Electric Holdings, Inc. (LECO - Free Report) shares have gained 55.9% in a year. The company has outperformed its industry’s growth of 31.2% and the S&P 500’s 34.9% rise over the same period.
Image Source: Zacks Investment Research
Let’s take a look into the factors behind this Zacks Rank #3 (Hold) company’s price appreciation.
Improved Order Levels
Lincoln Electric has witnessed improving order rates across all end-market sectors, regions and products. The company is witnessing strong quoting activity and high backlogs for equipment systems and automation solutions. Its equipment sales are being driven by strong demand across direct and distribution channels.
Robust backlog and acquisitions are expected to benefit the company’s performance through this year. It has also been effectively countering raw material inflation through pricing actions and improved productivity.
Backed by these tailwinds, the company has delivered improvements in revenues in the past 12 quarters. This momentum is expected to continue in the next few quarters as well. The company has a target of sales CAGR growth of high-single-digit to low-double-digit percentage for 2020-2025, per its Higher Standard 2025 Strategy.
The company has delivered a sales CAGR of 12% over the 2020-2023 period, which indicates that it is on track to achieve its goals. Also, the adjusted EPS CAGR is envisioned at high-teens to low 20% for 2020-2025. LECO has witnessed a CAGR of 31% in 2020-2023. For 2024, the company expects low to mid-single-digit organic sales growth, and incremental operating income margin in the low-to-mid 20%.
Solid Balance Sheet Bodes Well
Lincoln Electric had cash and cash equivalents of around $394 million at the end of 2023 compared with $197 million at 2022 end. The company generated a record $668 million in cash flow from operations in 2023, up 74% year over year. Its total debt-to-total capital ratio was 0.46 as of Dec 31, 2023, lower than 0.52 as of Dec 31, 2022.
The times interest earned ratio was 16.5 as of Dec 31, 2023. The company returned approximately $347 million to its shareholders in 2023 through dividends and share repurchases. Lincoln Electric has a balanced capital allocation strategy, prioritizing growth investment, while returning cash to shareholders.
The company had earlier raised its quarterly cash dividend by 11% to 71 cents per share. LECO will continue to evaluate M&A options focused primarily on tuck-in assets, supporting its Higher Standard 2025 strategy.
Focus on Innovation to Boost Growth
Lincoln Electric is focused on product development and using digital platforms to engage customers. LECO’s product launches in the automation solutions market are likely to aid growth.
The company is focused on its new additive services business, which will position it as a manufacturer of large-scale 3D-printed metal spell parts, prototypes and tooling for industrial customers. This is likely to be a growth opportunity for Lincoln Electric. The company continues to expand the brand's geographic and channel reach into attractive areas, such as automation, in sync with its strategy initiatives.
The Zacks Consensus Estimate for Cadre Holdings’ 2024 earnings is pegged at $1.15 per share. The consensus estimate for 2024 earnings has moved 6% north in the past 60 days and suggests year-over-year growth of 16.7%. The company has a trailing four-quarter average earnings surprise of 33%. CDRE shares have gained 72% in the past year.
The Zacks Consensus Estimate for AZZ’s fiscal 2024 earnings per share is pegged at $4.19. The consensus estimate for 2024 earnings has moved north by 2% in the past 60 days. The company has a trailing four-quarter average earnings surprise of 37.6%. AZZ shares have rallied 76.7% in the past year.
The Zacks Consensus Estimate for Proto Labs’ 2024 earnings is pegged at $1.62 per share. The consensus estimate for 2024 earnings has moved 11% north in the past 60 days and suggests year-over-year growth of 1.9%. The company has a trailing four-quarter average earnings surprise of 42.2%. PRLB shares have gained 15.7% in the past year.
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Lincoln Electric (LECO) Rises 56% in a Year: What's Driving It?
Lincoln Electric Holdings, Inc. (LECO - Free Report) shares have gained 55.9% in a year. The company has outperformed its industry’s growth of 31.2% and the S&P 500’s 34.9% rise over the same period.
Image Source: Zacks Investment Research
Let’s take a look into the factors behind this Zacks Rank #3 (Hold) company’s price appreciation.
Improved Order Levels
Lincoln Electric has witnessed improving order rates across all end-market sectors, regions and products. The company is witnessing strong quoting activity and high backlogs for equipment systems and automation solutions. Its equipment sales are being driven by strong demand across direct and distribution channels.
Robust backlog and acquisitions are expected to benefit the company’s performance through this year. It has also been effectively countering raw material inflation through pricing actions and improved productivity.
Backed by these tailwinds, the company has delivered improvements in revenues in the past 12 quarters. This momentum is expected to continue in the next few quarters as well. The company has a target of sales CAGR growth of high-single-digit to low-double-digit percentage for 2020-2025, per its Higher Standard 2025 Strategy.
The company has delivered a sales CAGR of 12% over the 2020-2023 period, which indicates that it is on track to achieve its goals. Also, the adjusted EPS CAGR is envisioned at high-teens to low 20% for 2020-2025. LECO has witnessed a CAGR of 31% in 2020-2023. For 2024, the company expects low to mid-single-digit organic sales growth, and incremental operating income margin in the low-to-mid 20%.
Solid Balance Sheet Bodes Well
Lincoln Electric had cash and cash equivalents of around $394 million at the end of 2023 compared with $197 million at 2022 end. The company generated a record $668 million in cash flow from operations in 2023, up 74% year over year. Its total debt-to-total capital ratio was 0.46 as of Dec 31, 2023, lower than 0.52 as of Dec 31, 2022.
The times interest earned ratio was 16.5 as of Dec 31, 2023. The company returned approximately $347 million to its shareholders in 2023 through dividends and share repurchases. Lincoln Electric has a balanced capital allocation strategy, prioritizing growth investment, while returning cash to shareholders.
The company had earlier raised its quarterly cash dividend by 11% to 71 cents per share. LECO will continue to evaluate M&A options focused primarily on tuck-in assets, supporting its Higher Standard 2025 strategy.
Focus on Innovation to Boost Growth
Lincoln Electric is focused on product development and using digital platforms to engage customers. LECO’s product launches in the automation solutions market are likely to aid growth.
The company is focused on its new additive services business, which will position it as a manufacturer of large-scale 3D-printed metal spell parts, prototypes and tooling for industrial customers. This is likely to be a growth opportunity for Lincoln Electric. The company continues to expand the brand's geographic and channel reach into attractive areas, such as automation, in sync with its strategy initiatives.
Key Picks
Some better-ranked stocks from the Industrial Products sector are Cadre Holdings, Inc. (CDRE - Free Report) , AZZ Inc. (AZZ - Free Report) , and Proto Labs, Inc. (PRLB - Free Report) . CDRE currently sports a Zacks Rank #1 (Strong Buy), and AZZ and PRLB carry a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Cadre Holdings’ 2024 earnings is pegged at $1.15 per share. The consensus estimate for 2024 earnings has moved 6% north in the past 60 days and suggests year-over-year growth of 16.7%. The company has a trailing four-quarter average earnings surprise of 33%. CDRE shares have gained 72% in the past year.
The Zacks Consensus Estimate for AZZ’s fiscal 2024 earnings per share is pegged at $4.19. The consensus estimate for 2024 earnings has moved north by 2% in the past 60 days. The company has a trailing four-quarter average earnings surprise of 37.6%. AZZ shares have rallied 76.7% in the past year.
The Zacks Consensus Estimate for Proto Labs’ 2024 earnings is pegged at $1.62 per share. The consensus estimate for 2024 earnings has moved 11% north in the past 60 days and suggests year-over-year growth of 1.9%. The company has a trailing four-quarter average earnings surprise of 42.2%. PRLB shares have gained 15.7% in the past year.