Lincoln Electric Beats - Analyst Blog
November 04 2011 - 11:07AM
Zacks
Lincoln Electric Holdings Inc. (LECO) recently
reported third quarter EPS of 66 cents, up 69% from 39 cents in the
year-earlier quarter and ahead of the Zacks Consensus Estimate of
62 cents.
The reported quarter did not note any special item. However, the
prior-year quarter noted a charge of one cent. Including this,
adjusted EPS amounted to 66 cents versus 38 cents in the
year-over-year quarter.
Total revenue, as reported by the company, increased 35% year
over year to $701.6 million, beating the Zacks Consensus Estimate
of $664 million.
Cost and Margins
Lincoln reported cost of goods sold of $516 million in the
reported quarter versus $375 million in the year-ago quarter. Gross
profit also increased to $185 million from $144 million in the
prior-year quarter. However, gross margins contracted 130 basis
points year over year to 26.4% in the quarter.
Selling, general & administrative expenses increased 16% to
$110.6 million from $95.6 1 million in the year-ago quarter.
Operating profit improved 54% to $74.8 million in the quarter.
Financial Position
As of September 30, 2011, cash and cash equivalents were $321.5
million versus $337.9 million as of June 30, 2011. Cash from
operating activities increased to $84.8 million during the quarter
from $56 million during the prior-year quarter.
As of September 30, 2011, the debt-to-capitalization ratio
remained flat at 7.1% compared with as of June 30, 2011.
Lincoln Electric’s board of directors has approved a 9.7%
increase in its quarterly dividend to 17 cents. The increased
dividend will be paid on January 13, 2012 to shareholders of record
as of December 31, 2011.
Our Take
Lincoln Electric continues to focus on its growth strategies,
which include acquisitions and new product introductions. The
company has a multi-year plan in place to turn more
cost-competitive by building manufacturing facilities in Eastern
Europe.
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 #2 Rank (short-term Buy 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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