On Sep 18, we reiterated our Neutral recommendation on
Lincoln Electric Holdings Inc.
), manufacturer and reseller of welding and cutting products.
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Lincoln Electric's second-quarter 2013 total revenue slipped 2%
year over year to $727 million, but earnings improved 12% to 91
cents per share. Total volume dipped 5%, despite 8% higher
volumes in South America on rising demand and 2% higher volumes
in Harris Products Group on international expansion.
Despite softer volumes as a result of softening demand in both
the domestic and international markets, Lincoln continues to
effectively drive margins. This is possible through enhanced
product mix, optimizing manufacturing footprint and focusing on
cost. The momentum is expected to continue aided by new product
introductions and prudent cost management.
Lincoln Electric has a strong balance sheet with a cash position
of $256 million and a debt-to-capitalization ratio of as low as
1.1%. The company continues to allocate capital between its
acquisition programs and returning cash to shareholders. We
expect Lincoln Electric will opt for further acquisitions, share
buybacks and dividend increases.
The company is well positioned to take advantage of the expected
long-term growth in its key global markets including power
generation, offshore drilling, pipelines and automotive sectors.
However, around 32% of Lincoln Electric's revenues are generated
from Europe and Asia. We remain cautious due to Europe's
persistent debt problems and the continuing softness in the
construction and related machinery markets in China.
Other Stocks to Consider
Other players that are worth a mention in the industry are
), with a Zacks Rank #1 (Strong Buy), and
), both carrying a Zacks Rank #2 (Buy).