Lincoln Electric Upgraded: KeyBanc Analyst Foresees Robust Growth On The Back Of EV Charging And Welding Segment

KeyBanc Capital Markets analyst Steve Barger upgraded the ratings on Lincoln Electric Holdings, Inc. LECO to Overweight from Sector Weight, with a price target of $232.

LECO's strong focus on execution has resulted in an "outstanding price realization," volume-driven operating leverage, record operating margin, and strong EPS visibility on EV charging growth, notes the analyst.

The analyst believes the company's earnings stability comes from its market-leading position in a ~$24 billion Global Welding market (LECO ~15% Global share).

The welding segment will be a crucial driver of revenues (Americas Welding segment: 61% of FY22 sales, 73% of FY22 EBIT). The analyst estimates the segment (excluding Automation, and EV Charging) to contribute ~51% of total EPS in 2023, ~42% in 2025, and ~35% in 2030.

Recent end-market commentary has mainly been positive, albeit with some conflicting macro concerns, and LECO's 1Q23 results reflected solid activity levels in most major end markets. 

Barger expects 2023 will remain resilient, driven by elevated backlogs, and LECO's Energy, Automotive, and Heavy Industries each up a low-teens % at a minimum.

Barger increased the 2023 EPS estimate to $8.90 from $8.82 (consensus $8.97). The analyst raised the 2024 EPS estimate to $9.69 from $9.45 (consensus $9.58). 

The analyst expects LECO's recent acquisition of Fori ($225 million expected annual revenues) to significantly boost the company's goal of $1 billion in Automation revenues by 2025.

LECO is moving into the ranks of companies that are "on-sale" in recessions, and industrial investors should lean toward being long for long periods.

Price Action: LECO shares are trading higher by 0.42% to $194.90 on the last check Wednesday.