On Dec 31, 2013, Zacks Investment Research upgraded Lincoln Electric Holdings Inc. (LECO) to a Zacks Rank #1 (Strong Buy).
Why the Upgrade?
Lincoln Electric’s share price and earnings estimates have witnessed a sharp upward trend on the back of better-than-expected third-quarter fiscal 2014 results. This manufacturer and reseller of welding and cutting products delivered impressive results, driven by strong top-line growth and margin contributions from its North America Welding and Europe Welding segments.
Adjusted earnings increased 9% to 94 cents per share from the year-ago quarter, ahead of the Zacks Consensus Estimate of 90 cents. The top line also improved 3.5% year over year, led by widespread demand across the key segments in North America, Europe and in Harris Products Group. With the latest earnings beat, the company has outperformed the Zacks Consensus Estimate for four quarters in a row. Average earnings surprise for the four quarters is 11.6%.
Following its third-quarter results, Lincoln Eectric announced acquisition of the assets of RealWeld Systems, Inc. RealWeld Systems' RealWeld Trainer solution offers hands-on arc welding training and evaluation programs. Hence, the acquisition will augment Lincoln Electric’s existing educational offering and strengthen its position as a market leader in welding education across North America.
Prior to this deal, the company had acquired Easom Automation in the third quarter, and this acquisition is expected to help the company advance its automation solutions. Easom will provide Lincoln Electric an opportunity to expand its automation capabilities into the heavy fabrication sector. The company also signed a licensing agreement with Helical Robotics to leverage its joint technologies in order to develop a trackless automated welding solution. This product is expected to be commercially available by late next year.
Lincoln Electric is planning to divest the manufacturing capacity in Asia-Pacific segment, to better align itself with the strategic repositioning activities in the region. The company’s share repurchase activity will also be accretive to earnings, going forward. However, weakness within the global mining sector and volatility in raw material price are headwinds in the near term.
Key Picks from the Sector
Some better-ranked stocks in the industrial products sector include Pioneer Power Solutions, Inc. (PPSI), CUI Global, Inc. (CUI) and AO Smith Corp. (AOS). While Pioneer Power sports a Zacks Rank #1 (Strong Buy), CUI Global and AO Smith hold a Zacks Rank #2 (Buy).
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