Lincoln Electric (NASDAQ: LECO) investors were hoping Wednesday that their company's first quarterly earnings report of 2025 wouldn't be indicative of how the rest of the year would go. The welding-products maker missed on the consensus analyst profitability estimate, and the market punished it by sending its stock to a more than 4% loss in price. The S&P 500 index (SNPINDEX: ^GSPC), meanwhile, rose almost 0.2% on the day.
A mixed first quarter
For the quarter, Lincoln Electric's net sales were slightly over $1 billion, for a 2% improvement on a year-over-year basis. That figure was also high enough to top the average pundit projection, which was slightly below $976 million.
The dynamics were different on the bottom line. Lincoln Electric's non-GAAP (adjusted) net income fell to just under $122 million, or $2.16 per share, from a year-ago profit of almost $129 million. However, the analysts tracking the company's stock were collectively expecting $2.24.
Management attributed the top-line increase largely to the contribution of recent acquisitions. Last July, the company purchased a privately held maker of mobile power solutions, Vanair Manufacturing. It hasn't disclosed the price for that deal. Excluding the effects of its acquisition activity, Lincoln Electric's organic sales saw a more than 1% year-over-year decline.
Flickering sentiment
Generally speaking, investors aren't impressed when a business grows solely or mostly due to asset additions. When this happens, they become understandably concerned that the company's core offerings aren't lighting the market on fire. Going forward, Lincoln Electric management will need to show that it can torch growth from what it's already built, rather than from what it's purchasing.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Lincoln Electric. The Motley Fool has a disclosure policy.
