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Can Cost Initiatives, Organic Growth Boost Lincoln Electric’s 2Q16 EPS?

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Lincoln Electric’s 2Q16 EPS estimate

Lincoln Electric’s (LECO) 2Q16 EPS (earnings per share) estimate is ~$0.83. LECO’s EPS came in at $0.76 in 1Q16 and $0.75 in 4Q15.

As we can see in the graph below, analysts’ estimates for the company’s 2Q16 earnings are lower when compared to the estimates for 2Q15. This occurred because LECO is impacted by softness in demand, as well as weakness in the oil and gas sector and in US export markets.

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Peers

The companies operating within LECO’s peer group include The Timken Company (TKR), Illinois Tools Works (ITW), and Stanley Black & Decker (SWK). In the last eight quarters, ITW and SWK were able to beat earnings estimates in each quarter. TKR beat earnings estimates in five of the last eight quarters.

Illinois Tools Works and Stanley Black & Decker expect their 2Q16 EPS to be better than 2Q15, at $1.40 and $1.70, respectively. The Timken Company expects its 2Q16 EPS to be $0.50, compared to $0.57 in 2Q15.

Investors who believe that 2Q16 will be good for industrials can consider the Vanguard Industrials ETF (VIS) and the iShares US Industrials ETF (IYJ). Major holdings in VIS include General Electric (GE) with a 12.1% weight, 3M (MMM) with a 4.3% weight, and United Technologies (UTX) with a 3.6% weight.

In the next article, let’s see whether the weak macro environment could be the reason for the 2Q16 underperformance of Lincoln Electric’s largest segment: Americas Welding.

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