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Lincoln Electric's 1Q Earnings Beat

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Lincoln Electric Holdings Inc. (LECO - Free Report) reported first-quarter 2013 adjusted earnings of 92 cents per share, up 21% from 76 cents earned in the year-earlier quarter and way ahead of the Zacks Consensus Estimate of 78 cents.

Adjusted income excluded a net effect of 12 cents pertaining to rationalization and asset impairment charges and impact of the devaluation of the Venezuelan currency in the reported quarter while the year-ago quarter did not note any such items. Including this, reported earnings were 80 cents per share in the quarter versus 76 cents in the year-ago quarter.

Total revenue slipped 1% year over year to $718.6 million, missing the Zacks Consensus Estimate of $755 million.

Cost and Margins

Cost of goods sold declined 4% to $492.1 million in the quarter. Gross profit increased 5% to $226.6 million. Gross margin expanded 190 basis points (bps) year over year to 31.5% in the quarter.

Selling, general & administrative expenses increased 11% to $136.9 million from $123.6 million in the year-ago quarter. Adjusted operating profit improved 8% to $99.3 million in the quarter. Adjusted operating margin inflated 120 bps to 13.8%.

Financial Position

As of Mar 31, 2013, cash and cash equivalents were $248 million versus $286 million as of Dec 31, 2012. Cash from operating activities was usage of $20.1 million in the quarter compared with $79.2 million in the prior-year quarter.

As of Mar 31, 2013, the debt-to-capitalization ratio was 1.3% compared with 1.5% as of Dec 31, 2012. The company expended $12.8 million for share repurchases and voluntarily contributed $50 million to its U.S. pension plans.

Our View

Lincoln Electric is focusing on pursuing new acquisitions, introducing new products as well as increasing its footprint in the global arena. However, the weak global economic condition will be a headwind moving ahead. Lincoln Electric currently retains a short-term Zacks Rank #3 (Hold).

Among Lincoln Electric’s peers, Illinois Tool Works Inc. (ITW - Free Report) reported first quarter adjusted earnings per share of 96 cents, up 8% year over year and in line with the Zacks Consensus Estimate, while Stanley Black & Decker (SWK - Free Report) and Kennametal Inc. (KMT - Free Report) will report their quarterly results on Apr 25.

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