Shares of Lincoln Electric Holdings Inc. LECO plunged to a new 52-week low of $49.30 on Jan 8, 2016 and eventually closed at $49.38, representing a one-year decline of 25.5%. Average volume of shares traded over the last three months was more than 464K.
What led to the Slump?
Lincoln Electric’s adjusted earnings declined 5.3% year over year to 89 cents per share in third-quarter of 2015, due to the unfavorable impact of foreign exchange swings. The company’s revenues decreased roughly 9.9% year over year mainly due to lower volumes. The volume decline was a result of weakening demand trends as well as challenging year-over-year comparisons.
Lincoln Electric remains cautious about demand trends for 2015. The company stated that the fourth quarter of 2015 will remain challenging due to compressing revenue trends, extended OEM (Original Equipment Manufacturer) shutdowns and difficult year-over-year comparisons.
Lincoln Electric’s organic European sales declined in the third quarter as weakness in the oil and gas sector persisted across Northern Europe, Russia and the Middle East. Weakness in the oil and gas sector and related industries will hurt the company’s full-year revenues and earnings. Through Oct 2015, the company experienced weakening industrial demand trends in its end markets.
In addition, general fabrication declined, along with increasing softness in heavy fabrication, as commodity prices continued to contract, impacting heavy equipment. These factors will continue to affect Lincoln Electric’s performance. The company also remains concerned about its Venezuelan operations, which could be negatively impacted by additional currency remeasurements or devaluations, and increased costs due to changes in raw material sourcing. Inability to obtain required production materials may also interrupt operations.
Moreover, Lincoln Electric continues to see challenges in the Australian business due to persistent weakness in mining. Volatile copper prices remain a matter of concern.
These bearish factors have triggered a downtrend in this Zacks Rank #4 (Sell) company’s estimates in recent times. In fact, the Zacks Consensus Estimate decreased 0.8% to $3.53 for 2015 and 3% to $3.59 for 2016.
Stocks that Warrant a Look
Stocks in the same sector that are worth a look include Albany International Corp. AIN, Astec Industries, Inc. ASTE and Berry Plastics Group, Inc. BERY. All these stocks carry a Zacks Rank #2 (Buy).
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