Industrial stock Lincoln Electric exploded out of a base Friday, hitting a buy point and lifting into the buy zone. This industry leader is today's IBD 50 Stocks To Watch pick as it reaches an all-time high.
Lincoln Electric holds the top spot out of nine stocks in the Machinery-Tools & Related industry group, which is ranked 57th out of the 197 IBD groups. The group has slid from 24th just one week ago.
The Cleveland-based manufacturer's $8.8 billion market cap is smaller than industry giants W.W. Grainger, Fastenal and Xylem, which are all above $20 billion.
Lincoln has 56 locations in 19 countries, distributing products to over 160 countries. Their business segments are divided into Americas Welding, International Welding and Harris Products Group.
The firm manufactures welding, cutting and training equipment. The welding solutions division services the automotive, fabrication, offshore rigs, pipeline, building and bridge structures industries. Robotic welding equipment is designed to decrease customer manufacturing costs, increase quality and productivity.
Acquisition Assists $1 Billion Target
Lincoln completed its acquisition of Fori Automation on Dec. 1. and closed a $400 million senior secured term loan to partially fund the acquisition.
Fori specializes in the engineering, design and manufacture of welding products. Three-quarters of Fori's revenue will add to Americas Welding bottom line, with the remaining 25% in International Welding.
"The acquisition increases our annualized automation portfolio revenue to over $850 million as we advance towards our Higher Standard 2025 Strategy $1 billion target and our added scale allows us to better serve customers' growing automation demands across different end markets," said Christopher L. Mapes, Lincoln's chairman, president and CEO.
Industrial Stock Hits Buy Point And All-Time High
LECO stock broke out of a flat base in slightly above average volume, hitting the 150.78 buy point in Friday's market rally. Shares are in the 5% buy zone up to 158.32 on the MarketSmith chart. The newly formed base emerged after the stock broke out from a cup base, hitting the 148.60 buy point on Nov. 15.
Shares found renewed interest following the announcement of its Fori acquisition on Dec. 1. The stock started the new year by rising above its 21-day exponential moving average on Jan. 3. Shares hit an all-time high of 156.60 on Monday.
LECO's relative strength line forged a steady rise throughout 2022, showing its dominance over the S&P 500. The 92 Relative Strength Rating has moved up from 88 four weeks ago, outperforming 92% of stocks in the IBD database.
Consistent Double-Digit Earnings Growth
Earnings per share have been in the low two-dollar range for the last three quarters. The Q3 2022 quarter posted a profit of $2.04 per share, down from $2.18 and $2.10 in the last two reporting periods. LECO is scheduled to report Q3 results in February.
Full-year earnings of $8.21 per share in 2022, up from $6.22 cents in 2021, show a 32% increase. For 2023, analysts forecast modest 5% annual EPS growth, to $8.62.
Quarterly sales growth decelerated somewhat in the last two quarters. The firm posted 16% growth in the latest quarter, down from 17% and 22% in the prior two quarters.
Mutual funds own 48% of the industrial stock, with 659 owning shares in December, up from 644 in September and 608 in June.
Lincoln declared a 14.3% dividend increase, bringing it to 64 cents per share for shareholders of record on Dec. 31. The increase marks the stock's first since 2021.
Industrial Stock Makes Top 100 ESG Companies
Lincoln for the first time made the IBD Best ESG companies list, ranking 91st out of 100 on the elite roster.
The firm's 2025 long-term Higher Standard Strategy consists of four pillars: Customer Focuses, Solutions & Value, Employee Development and Operational Excellence. In 2021, the firm booked an 18% reduction in greenhouse gas emissions, a 75% increase in recycling, 96% landfill avoidance and 21% water reduction.
Lincoln strives to follow the United Nations 2023 Agenda for Sustainable Development and is committed to reduce safety issues by 52% in 2025.
It is working toward increased gender representation and ethic diversity across its units.
