Lincoln Electric Earnings: Full-Year Outlook Maintained After Solid Quarter

Narrow-moat-rated Lincoln Electric LECO reported solid second-quarter results, featuring a 12% year-over-year increase in adjusted EPS, from $2.18 to $2.44. We’ve raised our fair value estimate to $171 from $159, which reflects our more optimistic revenue growth and operating margin projections as well as time value of money.

Lincoln Electric’s second-quarter organic sales were up by 4.5% from the prior-year period, driven by 3.6% volume growth and 0.9% higher pricing. Volumes were up 5.8% in Americas welding and 3.8% in international welding, but down 6.4% in the Harris Products Group as the latter had to contend with headwinds in the retail channel and residential applications. By end market, organic sales were up by low-double digits in heavy industry and energy, down low-single digits in general industries, down midsingle digits in automotive, and down midteens in construction and infrastructure.

Management maintained its full-year 2023 outlook and continues to anticipate organic sales growth in the mid- to high-single digits and incremental operating margins in the mid- to high teens. The automation business is currently generating revenue at an annual run rate of over $900 million and growing at a high-single-digit clip, on pace to hit management’s target of over $1 billion by 2025.

Lincoln Electric also announced that current CEO Christopher L. Mapes will retire as president and CEO at the end of 2023. Mapes will be designated as executive chairman of the board. Current chief operating officer Steven B. Hedlund, who has been with Lincoln Electric for around 15 years, will take the helm as president and CEO. We believe that the company remains in capable hands, and we see no reason to change our Standard capital allocation rating.