On May 29, 2014, we issued an updated research report on
Lincoln Electric Holdings Inc.
). The manufacturer and reseller of welding and cutting products
recorded fall in revenues and earnings in first-quarter 2014 as
benefits achieved from acquisitions and steady price-performance
were offset by a decline in volumes.
Notably, Lincoln Electric's revenue decreased 4.7% year over year
to $685 million in the first quarter. Though acquisitions
contributed to an increase of 1.1% in sales, sales volumes
decreased 5% and foreign exchange had a negative impact of 1.2% on
Lincoln Electric's first-quarter earnings per share came in at 91
cents, a 1.1% decline from 92 cents per share in the year-ago
quarter. The company did not provide any specific guidance for 2014
and hinted that top-line performance will remain sluggish, given
its end-market exposure. Moreover, weakness within the global
mining sector remains a headwind in the near term.
Additionally, Lincoln Electric recorded $17.7 million negative
impact from foreign currency translation in the first quarter. On
Mar, 2014, the company shifted Venezuelan exchange rate from 6.3
bolivars to the dollar to the SICAD I rate of 10.7. This will
result in lower reported earnings from Venezuelan operations with
additional charges of $3.5 million in the second quarter. The
operating environment in Venezuela continues to remain a challenge
Further, the company continues to experience weakness in Australia
and China and remains uncertain about any near-term improvement. In
addition, raw material costs have been escalating and margins will
be affected due to competitive pricing within its various market
The only encouraging matter is that Lincoln Electric enhanced its
product portfolio in many key high-growth areas through
acquisitions. In Nov 2013, Lincoln Electric announced the
acquisition of an ownership interest in Burlington Automation
Corporation and also entered into a definitive agreement to acquire
Robolution GmbH. Lincoln's global acquisition strategy will help in
the expansion of its geographic reach.
Lincoln Electric currently carries a Zacks Rank #4 (Sell).
Other Stocks to Consider
Other players that are worth considering in the sector are
AO Smith Corp.
Atlas Copco AB
Blount International Inc.
). All these carry a Zacks Rank #2 (Buy).
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LINCOLN ELECTRC (LECO): Free Stock Analysis
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