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Lincoln Electric (LECO) Q4 Earnings in Line, Revenues Beat


Lincoln Electric Holdings, Inc. LECO reported earnings of 81 cents per share in fourth-quarter 2016, up 8% year over year. Earnings came in line with the Zacks Consensus Estimate.

Including one-time items, earnings in the year-ago quarter were 81cents compared with 68 cents in the prior year quarter. The reported quarter did not include any such adjustments.

Total revenue edged down 0.7% year over year to $564 million. Sales, however, beat the Zacks Consensus Estimate of $547 million.

Lincoln Electric Holdings, Inc. Price, Consensus and EPS Surprise

Lincoln Electric Holdings, Inc. Price, Consensus and EPS Surprise | Lincoln Electric Holdings, Inc. Quote

Costs and Margins

Cost of goods sold dipped 1.5% year over year to $366.4 million. Gross profit inched up 0.7% year over year at $197.5 million. However, gross margin expanded 50 basis points (bps) year over year to 35%.

Selling, general and administrative expenses increased 3% to $114.7 million from $110.8 million in the prior-year quarter. Operating profit dipped 3% year over year to $83 million in the quarter. Operating margin contracted 30 bps year over year to 14.7%.

Financial Update

Lincoln Electric reported cash and cash equivalents of $379 million at the end of 2016, up from $304 million as of Dec 31, 2015. In 2016, the company delivered $66.6 million of operating cash flow compared with $75.4 million in 2015.

Lincoln Electric paid its shareholders $74.6 million through dividends and repurchase of 0.8 million shares during the quarter. The company declared a 9.4% hike in the quarterly cash dividend, from 32 cents per share to 35 cents, or $1.40 per share on an annual basis, which was paid on Jan13, 2017.

On Oct 20, 2016, Lincoln Electric issued Senior Unsecured Notes in aggregate principal amount of $350 million through a private placement. The notes have maturities ranging from 12 to 25 years, with a weighted average effective interest rate of 3.1% and a weighted average term of 18 years. The proceeds will be utilized for general corporate purposes.

Effective Jun 30, 2016, the company deconsolidated the financial results of its Venezuela subsidiary and began reporting its results using the cost method of accounting. As a result, Venezuelan financial results are no longer included in the consolidated financial statements.

2016 Performance

Lincoln Electric posted adjusted earnings of $3.29 per share for 2016, down 5.5% year over year. Earnings missed the Zacks Consensus Estimate of $3.30. On a reported basis, including special items, Lincoln Electric’s earnings were $2.91 per share in the quarter, compared with $1.70 in the year-ago quarter.

Revenues for full-year 2016 declined 10.3% year over year to $2.3 billion. Revenues came in line with the Zacks Consensus Estimate.

Share Price Performance

In the last one year, Lincoln Electric has outperformed the Zacks classified Machinery Tools & Related Products sub-industry with respect to price performance. The stock gained around 47%, while the industry rose 42% over the same time frame.

Zacks Rank & Key Picks

Lincoln Electric currently carries a Zacks Rank #2 (Buy).

Some better-ranked stocks in the same sector include Kennametal Inc. KMT, Roper Technologies, Inc. ROP and Apogee Enterprises, Inc. APOG.

Kennametal has delivered an average positive earnings surprise of 9.90% in the last four quarters. The company sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Roper Technologies also boasts a Zacks Rank #1 and has delivered an average positive earnings surprise of 0.92% in the trailing four quarters. Apogee, another Zacks Rank #1 stock, has an average positive earnings surprise of 13.24% for the past four quarters.

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