Tuesday, February 26, 2019

Lincoln Electric's Results Highlight Some Of Today's Macro Modeling Challenges

Lincoln Electric (LECO) remains one of the most-respected companies I follow in the industrial space; even analysts who are negative on the shares for whatever reason usually feel compelled to acknowledge its strong share, variable cost structure, attractive ROIC history, and solid strategy. That said, the shares have basically traced the performance of the average industrial over the past year, lagged the sector over the past two years, and significantly lagged over the last five years – a phenomenon I attribute more to the high valuation the company has often enjoyed rather than any long-term reduction in business quality.

As far as considering the shares today, I’m not quite sure what to think. I see growing risks from macro headwinds in a number of important end-markets, but I don’t think my long-term growth assumptions are all that heroic and the shares look priced more or less in line with a lot of other industrial names that I believe to be less well-run. I think Lincoln shares may not do all that great in 2019 unless there is a favorable resolution to the U.S.- China trade issues and there’s re-acceleration in multiple end-markets, but as a long-term holding today’s price is at least okay in my book.

Read more here:
Lincoln Electric's Results Highlight Some Of Today's Macro Modeling Challenges

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