Monday, January 26, 2009

Lincoln Electric (NASDAQ:LECO): Downgraded to Sell, $35 tgt at Piper Jaffray

Piper Jaffray is out downgrading Lincoln Electric (NASDAQ:LECO) to Sell from Neutral, while lowering tgt to $35 from $44 as they believe that negative earnings revisions over the next year and sustained low visibility around a recovery will push the stock back to the lows ($35 per share) set in late-November 2008.

LECO shares have rallied along with other 'infrastructure plays'. It is becoming increasingly clear that benefits from the federal stimulus package will be minimal at best in FY09 and more likely to come in FY10/FY11.

In the meantime, Piper's channel checks with key customers and end markets are pointing to deteriorating unit volume demand and price concessions.

Firm is sharply lowering their FY09 sales and EPS estimates and initiating FY10 estimates that fall well shy of Street consensus. A return to past recession trough margins would equate to earnings of $2.35/share.

Notablecalls: This one will work big, I suspect. With Caterpillar (NYSE:CAT) out with dismal results and guidance I think LECO can do 3-4 pts of downside on this downgrade.

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