LECO Reports Strong Quarter - Analyst Blog
July 22 2011 - 12:04PM
Zacks
Lincoln Electric Holdings Inc. (LECO) recently
reported its second quarter earnings. EPS of 68 cents is up from 38
cents in the year-earlier quarter and ahead of the Zacks Consensus
Estimate of 55 cents.
The reported quarter did not note any special item. However, the
prior-year quarter noted a charge of one cent. Excluding this,
adjusted EPS amounted to 68 cents versus 39 cents in the
year-over-year quarter.
Total revenue, as reported by the company, increased 35.6% year
over year to $699.3 million. The company’s continued focus on new
products accounted for an increase in sales and market share
gains.
Cost and Margins
Lincoln reported cost of goods sold of $503.8 million in the
reported quarter versus $367.0 million in the year-ago quarter.
Gross profit also increased to $195.5 million from $148.6 million
in the prior-year quarter. Consequently, gross margins went up 100
basis points year over year to 28.0% in the quarter.
Selling, general & administrative expenses increased to
$115.5 million from $101.1 million in the year-ago quarter.
Operating income showed a drastic improvement and soared to $80.0
million from $51.1 million in the prior-year quarter.
Financial Position
As of June 30, 2011, cash and cash equivalents were $337.9
million versus $366.2 million as of December 31, 2010.
Cash from operating activities decreased to $28.8 million during
the quarter from $32.1 million during the prior-year quarter.
As of June 30, 2011, the debt-to-capitalization ratio improved
after dropping drastically to 0.1% compared with 7.4% as of March
31, 2011 and 7.8% as of December 31, 2010.
Outlook
Management believes that its constant focus on productivity
improvement and cost reduction will continue to offer operating
leverage and will be helpful in implementing its long-term strategy
and extend its benefits to its stakeholders.
Our Take
Lincoln Electric is pursuing a multi-year strategy to become
more cost competitive by building manufacturing facilities in
Eastern Europe and Asia. Recently, the company entered the Russian
market with the acquisition of Mezhgosmetiz-Mtsensk OAO and OOO
Severstal-metiz.
These acquisitions are likely to strengthen Lincoln's presence
in the Russian market. In addition to the above acquisitions, the
company also partnered with IPG Photonics Corporation to explore
global opportunities in the high-power laser welding and cutting
market.
Allied with its aim of turning cost-competitive, Lincoln
Electric is implementing various cost-control measures. Further,
the demand for its products is on the rise, leading us to believe
that the company will post strong growth on the heels of an
economic recovery and investments in the emerging markets. We
currently have a Zacks #3 Rank (short-term Hold recommendation) on
the stock.
Cleveland, Ohio-based Lincoln Electric designs, develops and
manufactures arc welding products, robotic arc-welding systems,
plasma and oxyfuel cutting equipment and commands a leading
position in the brazing and soldering alloys market. Lincoln
Electric competes with Illinois Tool Works Inc.
(ITW), Charter International Plc and ESAB Group Holdings Ltd.
ILL TOOL WORKS (ITW): Free Stock Analysis Report
LINCOLN ELECTRC (LECO): Free Stock Analysis Report
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