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Lincoln Electric Buys Worthington's Soldering Business

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Lincoln Electric Holdings Inc. (LECO - Free Report) has recently acquired the soldering business of Worthington Industries, Inc. (WOR - Free Report) . It has also agreed buy certain brazing assets of Worthington. These buyouts will enhance the company’s product portfolio, accelerate growth in the retail channel and aid its Harris business.
 
The soldering business buyout with expand Lincoln Electric’s Harris Products Group, which  includes the company's global cutting, soldering and brazing businesses, and retail business in the United States. The acquisition will add to the Group’s portfolio of industry-leading consumables with the addition of premium solders and fluxes. It will also accelerate growth in the retail channel. Lincoln Electric will have the most expansive soldering and brazing portfolio in the industry once the acquisition of Worthington’s brazing assets closes on Feb 1, 2019 (subject to customary closing conditions). The acquired assets are likely to generate annual revenues of approximately $25 million. 
 
In the first three quarters of 2018, the Harris Products Group reported a rise of 5% in net sales to $233 million. Adjusted earnings operating margin over the period was 11.8%, lower than 12% in the prior year comparable period. Notably, the Harris Products segment witnessed a tougher margin comparison in the second and third quarter of 2018. Further, lower commodity prices continue to dent margins. The company will likely face similar situation in fourth-quarter 2018 at Harris owing to rise in cost and inflationary pressure against the pricing management.
 
Acquisition Spree
 
Earlier in December 2018, Lincoln Electric acquired Inovatech Engineering Corporation and its related assets that will add Lincoln Electric’s Harris Products Group’s performance. The buyout will boost Lincoln Electric’s automated cutting solutions and application expertise for structural steel applications. Ontario, Canada-based Inovatech is a maker of advanced robotic plasma cutting solutions.
 
In January 2017, Lincoln Electric completed its acquisition of Air Liquide Welding, a subsidiary of Air Liquide. The buyout has enhanced the company’s global specialty consumables portfolio and extended its channel reach for equipment systems and cutting, soldering and brazing solutions in Europe. The acquisition also offers European customers more comprehensive welding solutions, greater technical application expertise and improved service levels. The Air Liquide Welding acquisition contributed 2 cents to adjusted earnings per share in the third quarter and is expected to contribute 6 cents to earnings in the fourth-quarter 2018.
 
Growth Drivers in Place
 
Lincoln Electric continues to witness double-digit organic sales growth in its three major end markets — automotive, heavy industries, general fabrication and energy. The current sales trends signal accelerating global industrial demand this year. Additionally, the company’s focus on commercializing innovative product and cost-cutting initiatives is likely to stoke growth. Lincoln Electric has increased investment in research and development, and continues to roll out several solutions in the automation solutions market. These product launches are likely to aid growth.
 
Share Price Performance
 
 
Lincoln Electric's shares have depreciated around 17% over the past year, compared with the industry’s decline of around 19%.
 
Zacks Rank & Stocks to Consider
 
Currently, Lincoln Electric carries a Zacks Rank #3 (Hold).
 
Some better-ranked stocks in the sector include Brady Corporation (BRC - Free Report) and Zebra Technologies Corporation (ZBRA - Free Report) . Both the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
 
Brady has surpassed estimates thrice in the trailing four quarters, recording average positive earnings surprise of 7.04%. Its shares have gone up 12% in a year’s time.
 
Zebra Technologies has outpaced estimates in the preceding four quarters, recording average earnings surprise of 13.79%. Its shares have gone up 45% in a year’s time.
 
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