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Why Is Lincoln Electric (LECO) Down 3.3% Since Last Earnings Report?

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A month has gone by since the last earnings report for Lincoln Electric Holdings (LECO - Free Report) . Shares have lost about 3.3% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Lincoln Electric due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Lincoln Electric Earnings Top, Revenues Lag in Q4
 
Lincoln Electric Holding delivered adjusted earnings of $1.29 per share in fourth-quarter 2018, surging 28% year over year. The reported figure also surpassed the Zacks Consensus Estimate of $1.20.
 
Including one-time items, earnings in the reported quarter came in at $1.35 compared with 36 cents recorded in the prior-year quarter.
 
Total revenues dipped 0.4% year over year to $744 million. Organic sales growth was 1.6% in the reported quarter. Sales missed the Zacks Consensus Estimate of $793 million.
 
Costs and Margins
 
Cost of goods sold decreased 3% year over year to $494 million. Gross profit advanced 5% year over year to $250 million. Gross margin contracted 180 basis points (bps) year over year to 33.47%.
 
Selling, general and administrative expenses inched up 0.7% to $154 million from the year-earlier quarter. Adjusted operating profit rose 7% year over year to $97 million in the reported quarter. Operating margin expanded 90 bps year over year to 13%.
 
Financial Update
 
Lincoln Electric had cash and cash equivalents of $359 million at the end of 2018 with $327 million recorded at the end of 2017. The company recorded cash flow from operations of $329 million in 2018 compared with $3354 million recorded in prior year.
 
2018 Results
 
Lincoln Electric reported adjusted earnings per share of $4.82 in 2018, up 27% from $3.79 in the prior year. Earnings beat the Zacks Consensus Estimate of $4.74. Including one-time items, earnings in the stood at $4.37 compared with $3.71 in the prior year.
 
Sales increased 15% year over year to $3.03 billion. The top line missed the Zacks Consensus Estimate of $3.05 billion.
 

How Have Estimates Been Moving Since Then?

Fresh estimates followed a flat path over the past two months.

VGM Scores

At this time, Lincoln Electric has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Lincoln Electric has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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