What Keeps Helping Lincoln Electric’s Impressive Return on Capital?
Where Does Lincoln Electric Stand after Its 1Q16 Results?
Lincoln Electric’s dividends and buyback
In 1Q16, despite its 16% decline in revenue and its 22% decline in adjusted profits (as compared to 1Q15), Lincoln Electric (LECO) has successfully given back $125 million to shareholders. Both in the form of dividends (up 10% to $23 million) and share repurchases (steady at $102 million). LECO undertook no acquisitions in 1Q16, but it did incur a capital expenditure of $9 million.
Lincoln Electric’s debt, liquidity, and return ratios
As of 1Q16, LECO has $375 million in debt (long-term debt and short-term debt) and equity of $892 million, which implies a debt-to-equity ratio of ~0.42x. But its cash stood at $221 million. During the same quarter in 2015, the company’s debt-to-equity ratio was ~0.38x while its cash stood at $304 million.
LECO has continued to generate strong returns over the past few years. With superior operational execution, the company has achieved an ROIC (return on invested capital) of 20.4%, as compared to 21.1% in 4Q15.
RBC Bearing (ROLL), Timken (TKR), and Blount International (BLT) are some of LECO’s peers in the industrial welding industry. On a yearly basis (as of April 19, 2016), these stock have declined by 1%, 11%, and 26%, respectively. LECO declined by 5% during the same period.
ETFs holding LECO
The Robo-Stox Global Robotics and Automation Index ETF (ROBO) and the S&P Midcap 400 Dividend Aristocrats ETF (REGL) have exposure to Lincoln Electric (LECO). LECO is also a part of the S&P 500 (SPY).
In the next and final part, we’ll check in with what Wall Street analysts are recommending for Lincoln Electric.
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