Lincoln Electric Q3 Earnings: Can NasdaqGS:LECO Hit Its $0.79 EPS Target?

in EARNINGS/INVESTING IDEAS by

Lincoln Electric Holdings, Inc. (NasdaqGS:LECO) is scheduled to report Q3 earnings results before markets open for trading on October 27, 2020.

The company is expected to report earnings of $0.79/share on revenue of $611.8 million. The consensus earnings per share (EPS) of $0.79/share is based on a poll of 11 analysts and represents a decline in eps of −27.8% over the same quarter last year, when the company reported earnings of $1.09/share.

The revenue forecast of $611.8 million based on a poll of 8 analysts implies a year-over-year (YoY) decline in revenue of −16.3%. Last year the company reported $730.8 million in revenue for the quarter.

Expected to report EPS contraction of −27.8% for Q3, 2020
Metric Expected Prior Year YoY Change
Revenue $611.83 $730.78 −16.3%
EPS $0.79 $1.09 −27.8%

Earnings Call Trends

Historically, management has exceeded analyst expectations 3 out of the last 8 tracked quarters, missed 2 quarters, and met expectations 3 quarters.

What are your expectations from Lincoln Electric Holdings, Inc. for earnings this quarter? Let us know in the comments!

Analyst Expected vs. Reported EPS
Quarter Expected Reported Surprise Result
Q2, 2020 $0.35 $0.80 130.4% Beat
Q1, 2020 $1 $1 0% Met
Q4, 2019 $1.13 $1.15 2.1% Beat
Q3, 2019 $1.24 $1.09 −12.2% Missed
Q2, 2019 $1.28 $1.28 0% Met
Q1, 2019 $1.22 $1.17 −4.2% Missed
Q4, 2018 $1.20 $1.29 7.6% Beat
Q3, 2018 $1.21 $1.21 0% Met

In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report. After the last earnings report for the period ending June 30, 2020, the stock price reacted by falling −1.2%.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
July 27, 2020 $91.53 $90.41 −1.2% Decline
April 27, 2020 $76.03 $80.99 6.5% Increase
February 13, 2020 $94.70 $92.58 −2.2% Decline
October 30, 2019 $94.32 $89.57 −5.0% Decline

The other question to consider is one of earnings manipulation. There is a lot of pressure on management each quarter to deliver on earnings expectations. The Beneish M-Score is a statistical model that provides some insight into whether the company might be manipulating earnings. With a Beneish M-Score of −3.02, the model suggests that the company is not likely to be an earnings manipulator. A value of −3.02 implies a 0.1% chance of earnings manipulation.

Fundamentals And Technical Analysis

Lincoln Electric Holdings, Inc. is currently trading at $101.98/share, up 1.2% for the day. The company is trading at approximately 99.2% of its 52-week high of $102.78/share. The company’s stock price is up 12.8% since the last earnings report and up 3.4% over the previous week.

The company’s 14 Day Relative Price Index (RSI) of 71.31 suggests the company is trading in technically overbought territory. The RSI is considered overbought when above 70 and oversold when below 30.


NasdaqGS:LECO Stock Price Chart
Source: Finbox

The current share price implies a price-to-earnings (P/E) multiple of 27.68 and a forward P/E multiple of 27.83.

Lincoln Electric Holdings, Inc.’s current share price also implies a price-to-book (P/B) multiple of 9.18. The following table summarizes some other key fundamental ratios:

Data as of October 21, 2020
Metric Value
Last Reported Fiscal Period Key FY2020.Q2
Period End Date June 30, 2020
Stock Price (Current) $101.98
P/E Ratio 27.7x
P/E Ratio (Fwd) 27.8x
PEG Ratio −1.0
Total Debt / Total Capital 12.0%
Levered Free Cash Flow $319.1 million
EV / EBITDA 15.7x

Finbox

Lincoln Electric Holdings, Inc. is a mid-cap stock with a market capitalization of $6.054 billion and a total enterprise value of $6.727 billion. The company operates in the Industrials sector and the Machinery industry.

Lincoln Electric Holdings, Inc., through its subsidiaries, designs, develops, manufactures, and sells welding, cutting, and brazing products worldwide. It operates through three segments: Americas Welding, International Welding, and The Harris Products Group. The company offers welding products, including arc welding power sources, plasma cutters, wire feeding systems, robotic welding packages, integrated automation systems, fume extraction equipment, consumable electrodes, fluxes and welding accessories, and specialty welding consumables and fabrication products. It also provides computer numeric controlled plasma and oxy-fuel cutting systems, and regulators and torches used in oxy-fuel welding, cutting, and brazing; and consumables used in the brazing and soldering alloys market. In addition, the company is involved in the retail business in the United States. It serves general fabrication, energy and process, automotive and transportation, heavy fabrication, and construction and infrastructure industries, as well as ship building and maintenance and repair markets. The company sells its products directly to users of welding products, as well as through industrial distributors, retailers, and agents. Lincoln Electric Holdings, Inc. was founded in 1895 and is headquartered in Cleveland, Ohio.

Expertise: financial modeling, mergers & acquisitions. Andy is also a founder at finbox.io, where he’s focused on building tools that make it faster and easier for investors to do investment research. Andy’s background is in investment banking where he led the analysis on over 50 board advisory engagements involving mergers and acquisitions, fairness opinions and solvency opinions. Some of his board advisory highlights: - Sears Holdings Corp.’s $620 mm spin-off via rights offering of Sears Outlet, Hometown Stores and Sears Hardware Stores. - Cerberus Capital Management’s $3.3 bn acquisition of SUPERVALU Inc.’s New Albertsons, Inc. assets. Andy can be reached at andy@finbox.io or at +1 (516) 778-6257.

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