Buoyed By The Industrial Recovery, Automation The Next Driver For Lincoln Electric

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.

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Buoyed By The Industrial Recovery, Automation The Next Driver For Lincoln Electric