We are downgrading our recommendation on Lincoln Electric from
Neutral to Underperform with a target price of $60. Lincoln
Electric's earnings decreased 1.1% year over year to $0.91 per
share in the first-quarter 2014. Total revenue also declined 4.7%
year over year to $685 million due to a drop in volumes. The
company expects its top-line performance to remain sluggish in
2014, given its end-market exposure. Lincoln Electric remains
cautious about the operating environment in Venezuela due to
persistent economic uncertainty and the limitation of converting
bolivars to the U.S. dollar. Other headwinds include weakness
within the global mining sector, volatility in raw material costs
and weakness in China.
Headquartered in Cleveland, OH, Lincoln Electric has more than
48 manufacturing locations, including operations and joint ventures
in 19 countries and a worldwide network of distributors and sales
offices covering more than 160 countries.
Lincoln is a full-line manufacturer and reseller of welding and
cutting products. The company's welding products range from welding
power sources, wire feeding systems, robotic welding packages, fume
extraction equipment, consumables and fluxes to regulators and
torches used in cutting. The level of product technology varies
from basic units used in light manufacturing to sophisticated
robotic applications used in high-production welding and
Lincoln Electric produces three types of arc welding electrodes
including stick electrodes, solid electrodes used for continuous
feeding in mechanized welding, and cored electrodes that are also
used for mechanized welding. Arc welding is carried out in many
industries. The metal working field involves production of arc
welding in transportation, construction, fabrication, petrochemical
and other industries. Also, in the manufacture of metal products,
arc welding applications range from production of consumer
appliances to fabrication of heavy machinery and structural steel.
Arc welding is the dominant joining method for building and other
industrial construction, including oil and gas pipeline
fabrication, and oil refinery construction. The company sells its
products in both domestic and international markets.
Lincoln has five operating segments, namely North America
Welding, Europe Welding, Asia Pacific Welding, South America
Welding and The Harris Products Group. The North America Welding
segment comprises operations in the United States, Canada and
Mexico. The Europe Welding, Asia Pacific Welding, South America
Welding segments contain welding operations in Europe, Asia Pacific
and South America, respectively. The fifth segment, The Harris
Products Group, includes the company's global cutting, soldering
and brazing businesses as well as the retail business in the United
Lincoln Electric Holdings Inc. (LECO): Read the
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