Lincoln Electric Holdings Inc.
) recently reported second-quarter 2012 earnings of 81 cents per
share, up 19% from 68 cents in the year-earlier quarter. Earnings
missed the Zacks Consensus Estimate of 85 cents.
Adjusted income excluded some special items of 2 cents per share in
the reported quarter. Including these special items, earnings as
reported by the company were 79 cents per share compared with 68
cents in the year-ago quarter.
Total revenues increased 6.4% year over year to $744 million,
although missing the Zacks Consensus Estimate of $799 million. The
improvement mainly stemmed from the strong performance in the North
America welding segment during the quarter.
Cost and Margins
Cost of goods sold increased 3% to $519 million in the reported
quarter versus $503.8 million in the year-ago quarter. Gross profit
also increased 15.1% to $225 million from $195.5 million in the
prior-year quarter. Gross margins expanded 220 basis points year
over year to 30.2% in the quarter.
Selling, general & administrative expenses increased 10.5% to
$127.7 million from $115.5 million in the year-ago quarter.
Adjusted operating profit improved 23.4% to $98.7 million in the
As of June 30, 2012, cash and cash equivalents were $308 million
versus $361.1 million as of December 31, 2011. Cash from operating
activities increased substantially to $81.7 million during the
quarter from $28.8 million during the prior-year quarter.
As of June 30, 2012, the debt-to-capitalization ratio was 1.7%
compared with 8% as of December 31, 2011. During the first six
months of 2012, Lincoln Electric repaid its $80 million senior
unsecured notes and returned $68.5 million to shareholders through
the payment of $28.4 million as dividends and share repurchases
worth $40.1 million.
During the second quarter, demand for Lincoln Electric's products
in the North American market remained robust. However, demand
trends in the international market including Europe, Asia Pacific
and South America suffered and worsened, owing to the ongoing weak
global economic conditions.
We believe that Lincoln Electric's global growth strategy which
entails acquisitions, introducing new products and increasing its
footprint in the global arena will help it fare well through the
depressed economic conditions in the long run.
Lincoln Electric faces competition from companies like
Illinois Tool Works Inc.
) and privately held Charter International Plc. The company retains
a short-term Zacks #4 Rank (Sell). We have a long-term Neutral
recommendation on the stock.
ILL TOOL WORKS (ITW): Free Stock Analysis
LINCOLN ELECTRC (LECO): Free Stock Analysis
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