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What Transformation Means to Lincoln Electric

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Simplified organizational structure for efficiency

To simplify its organizational complexity and drive efficiencies, Lincoln Electric (LECO) has undergone a transformation toward a new organizational structure. According to LECO’s management, the new organizational structure is expected to improve efficiencies extensively.

With this move, process integration and product development will also likely jump across different regions. In turn, customers are expected to be served better, and organization should move toward more profitability. This will give an impetus to LECO’s growth strategy and vision for 2020.

What Transformation Means to Lincoln Electric

In 1Q16, LECO reported three operating segments. These are Americas Welding, International Welding, and The Harris Product Group, which contributed 65%, 23%, and 12%, respectively, to total revenues in 1Q16.

What Transformation Means to Lincoln Electric

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Lincoln’s growth strategy and vision for 2020

LECO aspires to increase its global presences and market share. It intends to improve its presences by focusing on innovative and cost-effective welding solutions. The company will focus on its capabilities as well as on product offerings.

By 2020, the company expects to double its size. For this, LECO needs to increase its sales at a compounded annual growth rate of 10% or more. It visualizes a return on invested capital of more than 15% through 2020.

ETF investments

LECO is a part of the S&P Midcap 400 Dividend Aristocrats ETF (REGL) and accounts for 2.3% of the fund’s total holdings. Investors in REGL would benefit if LECO surpasses its targets set in 2016. Notably, Nordon (NDSN), Questar (STR), and Telephone and Data System (TDS) are among the top ten holdings of REGL, accounting for 2.5%, 2.4%, and 2.4%, respectively, of its total holdings. LECO is also part of the S&P 500 (SPY).

In the next part, we’ll discuss what happened to LECO’s cash flows from operations in 1Q16.

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