Lincoln Electric Holdings, Inc. - Value
January 11 2012 - 7:00PM
Zacks
Lincoln Electric Holdings, Inc. (LECO) is expected to post
double digit earnings growth in 2011 and again in 2012. Shares of
this Zacks #1 Rank (Strong Buy) have regained pre-Recession highs.
Yet, the company still offers value with a forward P/E of 14.6.
Lincoln Electric, founded in 1895, manufactures arc
welding products, robotic arc-welding systems, and plasma and
oxyfuel cutting equipment.
It is headquartered in Cleveland and has 43
manufacturing locations, including manufacturing facilities and
alliances in 19 countries. The company also has distributors and
sales offices in more than 160 countries.
Arc welding is used in many industries including
metal working for transportation, construction and petrochemicals.
Arc welding applications are used to manufacture heavy machinery
and structural steel.
Arc welding is also the dominant joining method for
building oil and natural gas pipelines and refineries.
Raised the Dividend
On Nov 3, Lincoln Electric announced that its Board
had approved a 9.7% increase in the quarterly dividend to 17 cents
from 15.5 cents per share.
The dividend is currently yielding 1.7%.
Lincoln Electric Beat By 6.5% in the Third
Quarter
On Oct 27, Lincoln Electric reported its third
quarter results and surprised on the Zacks Consensus Estimate by 4
cents. Earnings per share were 66 cents, 71% higher than the year
ago results of 38 cents.
It was the 10th consecutive earnings surprise,
continuing its impressive earnings surprise streak.
Sales jumped 35.1% to $701.6 million from $519.3
million in the year ago quarter despite there being "ongoing global
economic and political uncertainty" in many of its key markets.
Analysts Still Bullish on 2012
Given the momentum in the third quarter, it's not
surprising that the analysts are also optimistic about the fourth
quarter and the full year.
The 2011 Zacks Consensus Estimate has risen to
$2.47 from $2.44 in the last 30 days.
That is earnings growth of 62.3% as the company
made just $1.52 in 2010.
What is expected in 2012?
Analysts are still bullish about 2012. 1 estimate
has moved higher in the last 30 days pushing up the Zacks Consensus
to $2.78 from $2.70 per share.
That is further earnings growth of 12.8%.
The company is scheduled to report fourth quarter
results on Feb 17 so stay tuned.
Breaking Out to New Highs
Shares sold off, as did the overall markets, in the
summer of 2011. It turns out that that was a buying
opportunity.
Because shares have sharply rebounded and are now
trading at new 52-week highs and look to be busting out to new
multi-year highs, surpassing those of 2008 before the Great
Recession.
![](http://www.zacks.com/images/upload_dir/1326315747.jpg)
But even with the hot share price, Lincoln Electric
still has value fundamentals.
In addition to a P/E under 15, which is what I use
as a cut-off for value, it also has a price-to-book ratio of 2.8. A
P/B ratio under 3.0 usually indicates value.
Looking at other fundamentals, Lincoln Electric has
a 1-year return on equity (ROE) of 15.9%. That is above its peers
which average 13.1%.
Lincoln Electric is one of those older
manufacturing companies that continues to consistently perform
quarter after quarter. It has both value and momentum, an unusual
combination.
Tracey Ryniec is the Value Stock Strategist for
Zacks.com. She is also the Editor of the Turnaround Trader and
Insider Trader services. You can follow her on twitter at
traceyryniec.
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