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Lincoln Electric (LECO) Hits 52-Week High: What's Aiding It?

Shares of Lincoln Electric Holdings, Inc. LECO scaled a new 52-week high of $182.29 on Jun 2, before closing the session a tad lower at $181.80.

LECO currently has a market capitalization of $10.5 billion and a Zacks Rank #3 (Hold).

Lincoln Electric’s shares have gained 30.6% in the past year against the industry’s decline of 10.6%.

 

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

 

Let’s delve deeper and analyze the factors aiding the stock.

Strong Q1 Results: Lincoln Electric delivered improvements in the bottom and top lines in the first quarter of 2023, aided by growth in organic sales and benefits from acquisitions.

Lincoln Electric witnessed improving order rates across all end-market sectors, regions and products. The company is witnessing strong quoting activity and record backlogs for equipment systems and automation solutions.

In the first quarter of 2023, equipment sales increased to a low-teen percentage, with strong demand across direct and distribution channels. Automation was up in the high-single-digit percentage range. Backed by these tailwinds, the company delivered record quarterly revenues in the March-end quarter.

Upbeat Growth Projections: Robust backlog and acquisitions are expected to benefit the company’s performance throughout this year. It has also been effectively managing to counter raw material inflation through pricing actions and improved productivity, which is expected to support its margins.

The Zacks Consensus Estimate for LECO’s 2023 bottom line has increased 4.7% in the past 60 days and the same for 2024 has moved up 5.5%. The favorable estimate revisions instill investors’ confidence in the stock.

Solid Balance Sheet: The company generated a record $124 million in cash flow from operations in the first quarter of 2023, up 188% year over year. Lincoln Electric had cash and cash equivalents of around $199 million at the end of the first quarter of 2023 compared with $154 million at 2022 end.

Its total debt-to-total capital ratio was 0.51 as of Mar 31, 2023. The times interest earned ratio was 17.1. The company returned approximately $70 million to its shareholders in the first three months of 2023 through dividends and share repurchases.

Lincoln Electric has a balanced capital allocation strategy, prioritizing growth investment, while returning cash to shareholders. The company will continue to evaluate M&A options focused primarily on tuck-in assets, supporting its Higher Standard 2025 strategy.

Focus on Innovation & Growth: Lincoln Electric is focused on product development and using digital platforms to engage customers. The company’s product launches in the automation solutions market are likely to aid growth.

It is focused on its new additive services business, which will position Lincoln Electric as a manufacturer of large-scale 3D-printed metal spell parts, prototypes and tooling for industrial customers. This is likely to be a growth opportunity for Lincoln Electric.

In 2022, the company utilized the metal 3D printing solution to deliver just-in-time parts to Chevron USA, Inc. CVX to help bring a refinery back online according to schedule. The company has been expanding its  geographic and channel reach into attractive areas such as automation in sync with its strategy initiatives. The company has a robust pipeline of additional product launches and acquisitions.

Stocks to Consider

Some better-ranked stocks from the Industrial Products sector are Worthington Industries, Inc. WOR, and Pentair plc PNR. WOR flaunts a Zacks Rank #1 (Strong Buy) at present, and PNR has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Worthington Industries has an average trailing four-quarter earnings surprise of 27.5%. The Zacks Consensus Estimate for WOR’s fiscal 2023 earnings is pegged at $4.93 per share. The consensus estimate for 2023 earnings has moved north by 17.7% in the past 60 days. Its shares gained 26.9% in the last year.

The Zacks Consensus Estimate for Pentair’s 2023 earnings per share is pegged at $3.66, up 3% in the past 60 days. It has a trailing four-quarter average earnings surprise of 7.2%. PNR has gained 14.9% in the last year.

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