July 23, 2008 / 6:50 PM / in 10 years

UPDATE 2-Lincoln Electric Q2 profit beats Street; shares up

(Adds conference call details, analysts’ comments, updates share movement)

By Bhaswati Mukhopadhyay

BANGALORE, July 23 (Reuters) - Welding products maker Lincoln Electric Holdings Inc (LECO.O) posted better-than-expected second-quarter earnings, helped by U.S. exports and big infrastructure projects in emerging markets like India and China, sending its shares up as much as 16 percent.

The company has been challenged by the North American market and volatility in the metals markets, but its growth has been driven by higher international demand from oil, gas and energy related projects.

The U.S. slowdown is beginning to bottom out and should rebound towards the end of this year and next year, Walter Liptak of Barrington Research said.

The company, which also has operations in Russia and the Middle-East, said its China business grew 50 percent in the second quarter.

Infrastructure demand in China is clearly the biggest opportunity for Lincoln as infrastructure development continues beyond the Tier 1 cities, Michael Cox of Piper Jaffray said by phone.

The company is also benefiting from the burgeoning shipbuilding industry in China, added Cox, who has a “buy” rating on the stock.

The rebuild-up efforts following the earthquake in May will also provide significant opportunities for the company in China, Cox said.

Lincoln shares, which have gained more than 33 percent of their value in the last six months, were up $5.82 at $80.25 in late afternoon trade on Nasdaq. They touched a high of $86.47 earlier in the session.

Investors were cheered by the company’s European business, which was expected to be a drag on revenue but instead posted volume growth, said Liptak, who has an “outperform” rating on the stock.


Pricing and supply for key raw materials like steel and chemicals will continue to present challenges and could necessitate additional pricing adjustments, the company said in a conference call with analysts. Lincoln raised prices in February, April and July.

While volume increases contributed 3 percent to sales dollars in the quarter, pricing contributed 7 percent of the increase in sales dollars year-over-year, the company added.

Lincoln’s second-quarter net income rose about 27 percent to $70.1 million, or $1.62 a share.

Analysts on average were expecting earnings of $1.37 a share, before special items, according to Reuters Estimates.

Revenue rose more than 19 percent to $699.8 million, topping analysts’ average expectation of $662.3 million.

U.S. export sales increased more than 28 percent, while sales at its North American operations were up 10 percent.

The company’s key competitors are Europe’s ESAB, which is a unit of British engineer Charter Plc CHTR.L, and a unit of diversified manufacturer Illinois Tool Works Inc (ITW.N). (Editing by Himani Sarkar)

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