Lincoln Electric Downgraded to Strong Sell - Analyst Blog

Zacks Investment Research downgraded Lincoln Electric Holdings Inc. LECO to a Zacks Rank #5 (Strong Sell) on May 20.

Why the Downgrade?

Lincoln Electric witnessed sharp downward estimate revisions after reporting disappointing first-quarter 2014 results on April 23. Shares of this full-line manufacturer and reseller of welding and cutting products have also witnessed downward price movement since the first-quarter results.

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. Earnings, however, beat the Zacks Consensus Estimate by a penny.

Total revenue also declined 4.7% year over year to $685 million, due to a 5% fall in volumes that offset the benefits achieved from acquisitions and a steady price-performance. Moreover, the reported figure lagged the Zacks Consensus Estimate of $734 million.

The operating environment in Venezuela will continue to remain a challenge in 2014 for Lincoln Electric due to the persistent economic uncertainty prevalent in the country and limitation of converting bolivars to the U.S. dollar. Moreover, weakness within the global mining sector and volatility in raw material price are headwinds in the near term.

The Zacks Consensus Estimate for the second quarter of 2014 plunged 11% to 89 cents per share over the last 30 days. Likewise for fiscal 2014, the estimates dropped 8% to $3.60 a share. All the 6 estimates have undergone downward revision for the second quarter as well as for fiscal 2014.

Other Stocks to Consider

Not all machinery stocks are performing as poorly as Lincoln Electric. Some better-ranked stocks are Gorman-Rupp Co. GRC, Blount International Inc. BLT and IDEX Corporation IEX. While Gorman-Rupp holds a Zacks Rank #1 (Strong Buy), Blount International and IDEX carry a Zacks Rank #2 (Buy).