Why Is Lincoln Electric (LECO) Up 1.5% Since Last Earnings Report?
Lincoln Electric (LECO) reported earnings 30 days ago. What's next for the stock? We take a look at earnings estimates for some clues.
A month has gone by since the last earnings report for Lincoln Electric Holdings (LECO). Shares have added about 1.5% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Lincoln Electric due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Lincoln Electric Q2 Earnings & Sales Top Estimates, Up Y/Y
Lincoln Electric reported record second-quarter 2021 adjusted earnings of $1.67 per share, which beat the Zacks Consensus Estimate of $1.46. The bottom line also improved 109% year over year. Strong demand across end markets and improved productivity contributed to the company’s bottom-line growth.
Including one-time items, the bottom line came in at $1.60 per share compared with 45 cents in the prior-year quarter.
Total revenues increased 40% year over year to $826 million. Moreover, the top line surpassed the Zacks Consensus Estimate of $786 million. The improvement in revenues was owing to 36% growth in organic sales, favorable impact of 3.3% from foreign exchange and 0.6% benefit from acquisition.
Costs and Margins
Cost of goods sold went up 38% to $552 million from the prior-year quarter. Gross profit rose 45% to $274 million. Gross margin came in at 33% compared with the year-ago quarter’s 32%.
Selling, general and administrative expenses increased 20% year over year to $152 million. Adjusted operating profit increased 98% to $125 million in the quarter.
Adjusted operating margin was 15.1% in the reported quarter compared with 10.7% a year ago.
Americas Welding: The segment’s sales increased to $497 million from $361 million in the year-earlier period. Adjusted operating income totaled $84 million compared with $47 million witnessed in the prior-year quarter.
International Welding: This segment’s revenues increased 43% year over year to $259 million in the reported quarter. The segment reported adjusted operating profit of $30 million compared with the year-ago quarter’s $9.7 million.
The Harris Products Group: The segment’s second-quarter sales amounted to around $119 million, reflecting year-over-year improvement of 45.1%. Adjusted operating profit was $18 million compared with the prior-year quarter’s $12 million.
Lincoln Electric had cash and cash equivalents of around $191 million at the end of the second quarter of 2021 compared with $257 million at the end of the 2020. The company generated cash flow from operations of around $100 million during the reported quarter compared with $104 million in the prior-year quarter.
The company’s debt to invested capital was at 45.9% at the end of the second quarter of 2021 compared with 47.6% as of the end of 2020.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 5.11% due to these changes.
At this time, Lincoln Electric has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Lincoln Electric has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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