Managing expectations is an underappreciated part of the
investor relations process, but it is all the more challenging when the
company in question has earned more than just the benefit of the doubt
through years of above-average execution. Lincoln Electric (LECO)
has long been an excellent company, but the reactions to the last few
earnings releases (significant sell-offs) underline the high
expectations that accompany this leader in the welding industry.
I
like the long-term prospects for Lincoln Electric. The acquisition of
Air Liquide makes the company even more competitive with Colfax (CFX)
outside the U.S., and the company's investments in automation and
specialized applications like hard-facing should pay off with
above-market growth for many years. The "but" is the level of
expectations already built into the stock - while I believe Lincoln
Electric can deliver long-term FCF growth in the high single digits, I'd
need a share price in the low $80s (or below) to get to an attractive
total expected return.
Read more here:
Buoyed By The Industrial Recovery, Automation The Next Driver For Lincoln Electric
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