Lincoln Electric Holdings Inc.
) have gained 5% since it reported an 8% year-on-year improvement
in its third-quarter 2013 adjusted earnings to 86 cents per share
on Oct 31. Results also beat the Zacks Consensus Estimate of 84
cents. Despite a fall in revenues, continued focus on reducing
costs and initiatives that enhance profitability drove the
Adjusted income excluded a net effect of 6 cents pertaining to
rationalization and asset impairment charges and special items
attributable to non-controlling interests. The year-ago quarter
excluded special items rationalization and asset impairment
charges, impact of the devaluation of the Venezuelan currency and
special items attributable to non-controlling interests.
Including these, reported earnings were 80 cents per share in the
quarter versus 77 cents in the year-ago quarter.
Total revenue dropped 1% year over year to $692 million, missing
the Zacks Consensus Estimate of $705 million. A 2.2% benefit from
acquisitions was offset by 2.5% lower unit volumes and a slightly
unfavorable impact from foreign currency translation.
Cost and Margins
Cost of goods sold declined 5% to $459 million in the quarter.
Gross profit increased 9% to $233 million. Gross margin expanded
300 basis points (bps) year over year to 33.6% in the quarter
aided by better sales mix, an improved price cost relationship
and operational improvements.
Selling, general & administrative expenses increased 8% to
$131 million from $121 million in the year-ago quarter due to
incremental expenses from acquisitions and general increases in
SG&A spending. Adjusted operating profit improved 11% to
$101.5 million in the quarter. Adjusted operating margin inflated
150 bps to a record 14.7%.
As of Sep 30, 2013, cash and cash equivalents were $101.5 million
versus $286 million as of Dec 31, 2012. Cash from operating
activities was $155 million in the third quarter compared with
$82 million in the prior-year quarter.
As of Sep 30, 2013, the debt-to-capitalization ratio was 1.1%
compared with 1.5% as of Dec 31, 2012. The company spent $44
million for share repurchases in the quarter.
Lincoln Electric paid dividends of $16 million in the quarter. A
day before the earnings relase, Lincoln Electric's board of
directors had announced a 15% increase in quarterly cash dividend
to 23 cents. The increased dividend is payable on Jan 15, 2014 to
shareholders of record as of Dec 31, 2013.
Lincoln Electric did not provide any specific guidance for 2013
or 2014, but hinted that top line performance will remain
sluggish, given its end market exposure, ongoing economic policy
uncertainty and global growth forecast. However, the company will
continue to focus on initiatives that drive improved
profitability and earnings performance.
Despite softer volumes as a result of softening demand in both
domestic and international markets, Lincoln continues to
effectively drive margins. This is possible through enhancing
product mix, optimizing manufacturing footprint and focusing on
Going forward, Lincoln Electric will benefit from its
acquisition strategy, introduction of new products and long-term
growth in its key global markets as well as recovery in the
construction sector. However, we remain cautious due to
weakness in Europe .Lincoln Electric currently carries a
short-term Zacks Rank #3 (Hold).
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Stanley Black & Decker
) reported earnings per share from continuing operations of $1.39
in the third quarter of 2013, up from $1.22 reported in the
year-ago quarter and a cent above the Zacks Consensus Estimate of
Illinois Tool Works Inc.
) reported adjusted earnings per share from continuing operations
of 99 cents in the third quarter of 2013, up 11.2% year over year
from 89 cents reported in the year-ago quarter. The result,
however, was 9.2% below the Zacks Consensus Estimate of $1.09.
) adjusted earnings per share of 53 cents were below 57 cents
earnings reported in the year-ago quarter and also lagged the
Zacks Consensus Estimate of 55 cents.