Lincoln Electric Posts Better-Than-Expected Quarterly Profit; Street Sees 5% Upside

Lincoln Electric Holdings posted better-than-expected earnings in the fourth quarter, driven by an expansion of adjusted operating margin and prudent cost management. However, a decline in organic sales and currency headwinds kept its sales under pressure.

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Lincoln Electric’s (LECO) 4Q adjusted earnings increased 7.8% to $1.24 per share on a year-over-year basis and beat Street estimates of $1.06 per share. Sales decreased 5.8% to $693.8 million, but were above analysts’ expectations of $682.65 million.

Meanwhile, the company’s adjusted operating margin during the quarter expanded to 13.4% from 12.4% year-on-year. That said, organic sales fell 5.6%. (See Lincoln Electric stock analysis on TipRanks)

Lincoln Electric CEO Christopher L. Mapes said, “Strong execution of our strategic initiatives and cost reduction actions generated record cash flows, strong cash conversion performance and earnings growth in the quarter while also delivering record safety and environmental performance.” “Looking ahead, we are well-positioned to capitalize on growth and increase profitability and returns as we focus on achieving our long-term Higher Standard 2025 Strategy goals and superior long-term value for our stakeholders,” he added.

Following the 4Q results, Oppenheimer analyst Bryan Blair maintained a Hold rating on the stock. The analyst remains “encouraged by improving demand trends (vs. easy comps) and the rebound prospects of Lincoln’s differentiated automation platform.”

“Balancing this momentum with continued pandemic-related uncertainties,” Blair argues the company “is reasonably valued in current price range.”

The Street’s consensus rating on the stock is a Hold. That’s based on 2 Holds, 1 Buy and 1 Sell. Looking ahead, the average analyst price target stands at $121.67, putting the upside potential at about 5.1% over the next 12 months. Shares have increased nearly 26.3% over the past year.