Lincoln Electric Holdings Inc. (LECO) is a leading manufacturer and reseller of welding and cutting products. The company has spent the last couple of years shifting manufacturing facilities to low-cost countries and expanding production capabilities to fast-growing markets in China and India.

Going forward, we expect LECO to benefit from the welding product demand created by the boom in infrastructure spending, especially in the oil & gas sector. But, there is always the risk that projects could get delayed if commodity prices collapse. Given the macro risks, we initiate coverage of LECO with a Hold and a price target of $80.00 per share, which is 15.5x our FY08 estimate of $5.16.

Lincoln is benefiting from the increase in energy-related projects that drive demand for its industrial welding machines and consumables. The oil & gas infrastructure spending continues to drive sales and offset the weakness in soldering and brazing products from the U.S housing slowdown. The same goes for Europe. In Latin America, sales have grown by more than 30% in the last couple of quarters. The Middle East economies are also spending strongly on energy-related investments.

LECO's healthy balance sheet affords it the flexibility to finance its future growth requirements. Its business model throws off substantial amounts of free cash flow. But we remain concerned about inflationary pressures, slowing growth in the U.S and Europe and the potential for a reversal of the commodity boom.

We have valued Lincoln Electric using the P/E valuation metric and forward earnings estimates. At its current price, LECO trades at a P/E of 15.5x our FY08 EPS estimate of $5.16. This is a premium to the industry median multiple of 11.2x.