Lincoln Electric (LECO) Buys Fori to Boost Automation Growth

Zacks Equity Research Published on December 02, 2022

Lincoln Electric Holdings Inc. (LECO - Free Report) announced that it closed the deal to acquire Fori Automation Inc.

The purchase of Fori will help LECO speed up its automation growth strategy by increasing annualized automation portfolio revenues to more than $850 million and get a head start to achieve the $1-billion target under the Higher Standard 2025 Strategy. The acquisition will expand the company’s geographic footprint to serve customers’ needs.

On Oct 14, Lincoln Electric announced that it entered an agreement to buy Fori for a cash purchase price of $427 million. LECO has since raised a $400-million senior secured term loan to partially fund the deal.

Headquartered in Shelby Township, MI, Fori mainly provides automotive and aerospace OEMs. It also operates in six international facilities across Latin America, Europe and Asia.

The transaction will benefit customers of both organizations by providing them with quality engineering expertise. LECO and Fori will help aerospace, automotive and industrial customers to achieve their operational goals.

LECO anticipates the acquisition to increase its earnings by 12 cents to 15 cents per share in 2023, excluding transaction costs.

The company stated that about 75% of Fori’s revenues would be reflected in the Americas Welding segment and the remaining 25% would be part of the International Welding segment. The Americas Welding segment of Lincoln Electric includes welding operations in North and South America, whereas the International Welding segment incorporates welding operations in Europe, Africa, Asia and Australia.

In the last reported quarter, net revenues of the Americas Welding segment were $586 million, and the same for the International Welding segment was $217 million.

LECO reported earnings of $2.04 per share in third-quarter 2022, beating the Zacks Consensus Estimate of $1.96. This also compares favorably with earnings of $1.56 per share in the prior-year quarter.

Total revenues rose 16% year over year to $935.2 million. The top line surpassed the Zacks Consensus Estimate of $919 million. The improvement in revenues can be attributed to 21.3% growth in organic sales and a 1.3% benefit from acquisitions, partly offset by an unfavorable foreign currency exchange of 6.6%.

The Zacks Consensus Estimate for LECO’s current-year earnings is pegged at $8.23 per share, suggesting growth of 32.2% from the previous year’s reported number. The Zacks Consensus Estimate for 2022 total revenues is pegged at $3.76 billion, indicating year-over-year growth of 16.1%.

LECO has a trailing four-quarter earnings surprise of 11.6%, on average.

Price Performance

Lincoln Electric’s shares have increased 9.2% in the past year against the industry’s fall of 37.8%.

Zacks Rank and Stocks to Consider

Lincoln Electric currently carries a Zacks Rank of 3 (Hold).

Some better-ranked stocks from the Industrial Products sector are Hubbell (HUBB - Free Report) , Deere (DE - Free Report) , and W.W. Grainger (GWW - Free Report) . HUBB flaunts a Zacks Rank #1 (Strong Buy), while DE and GWW carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Hubbell’s earnings surprise in the last four quarters was 10.6%, on average. In the past 60 days, HUBB’s earnings estimates have increased 6.1% for 2022. For the ongoing year, the bottom line is estimated to be $10.4, suggesting growth of 29.3% from the prior-year reported level. The HUBB stock has gained 24.6% in the past year.

Deere has an estimated year-over-year earnings growth rate of 17.2% for the current fiscal year. Earnings estimates for the company are pegged at $27.28 per share. DE has an average trailing four-quarter earnings surprise of 7.1%. Its shares have gained 26% over the past year.

W.W. Grainger delivered a trailing four-quarter earnings surprise of 10.1%, on average. Current-year earnings are estimated to be $29.31 per share, suggesting growth of 161.1% from the year-ago reported figure. GWW’s shares have risen 23.6% in the past year.

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