Lincoln Electric Q4 Earnings Call Highlights

Lincoln Electric (NASDAQ:LECO) executives told investors the company delivered “record 2025 performance” despite what management repeatedly characterized as challenged end markets and choppy capital spending. On the company’s fiscal fourth-quarter call, leadership highlighted full-year sales growth, record adjusted earnings per share, and strong cash generation, while also outlining a new “RISE” strategy framework and 2030 financial targets.

Record 2025 results, with automation a key swing factor

Chairman and CEO Steve Hedlund said 2025 sales increased 6% to a record $4.2 billion, driven by acquisitions and price. He added that Lincoln maintained the prior year’s record adjusted operating income margin, grew adjusted EPS to a record $9.87, and generated strong cash flow from operations that supported “record cash returns to shareholders.”

Hedlund said disciplined cost management and supply chain execution helped the company finish the year at its “neutral price cost target,” and the company generated an incremental $31 million of permanent savings from savings programs.

In the fourth quarter, management said organic sales rose 2.5% on price but were largely offset by weaker volumes, which executives tied in part to a difficult comparison in automation. Hedlund said that excluding automation, organic sales would have increased about 8%.

Automation sales were $240 million in the quarter, down 11% from a record prior-year period. For the full year, automation sales were $870 million, described as a mid-single-digit percentage decline. Hedlund said the company was encouraged by strong order rates and a solid backlog in the fourth quarter, which management expects to support growth in 2026, though the company expects first-quarter sales to be steady year-over-year before growth begins in the second quarter due to seasonality and revenue recognition timing.

Fourth-quarter margins and earnings: price up, volumes down

CFO Gabe Bruno said fourth-quarter sales increased 5.5% to $1.079 billion, reflecting 8.9% higher price, 1.9% favorable foreign exchange, and a 1.1% acquisition benefit, partially offset by 6.4% lower volumes.

Gross profit dollars rose about 1% to $374 million, while gross margin declined 140 basis points to 34.7%. Bruno said savings actions and cost management were offset by lower volume and a $3 million LIFO charge. SG&A expense decreased about $3 million from permanent savings and lower employee costs, partially offset by foreign exchange and higher discretionary spending; SG&A as a percentage of sales declined 130 basis points to 17%.

Reported operating income increased 4% to $184 million. Adjusted operating income (excluding special items largely tied to acquisitions, rationalization, and asset impairment) also rose 4% to $194 million, with adjusted operating margin down 20 basis points to 18%.

Lincoln reported an effective tax rate of 21.2%, 510 basis points higher than the prior year. Bruno said the rate included an approximately $3 million special item tax expense tied to an election of provisions within the “One Big Beautiful Bill Act,” which also reduced tax payments by about $25 million in the quarter; the company expects a similar benefit in the first quarter of 2026. Adjusted effective tax rate was 19.8%.

Diluted EPS was $2.45, and adjusted EPS increased 3% to $2.65, including a $0.07 benefit from share repurchases and a $0.01 favorable impact from foreign exchange.

Segment performance: strong Americas margins, Europe pressure

• Americas Welding: Sales increased about 4% on higher price and favorable foreign exchange, offset by roughly 7% lower volumes primarily from automation. Adjusted EBIT rose 7% to $141 million and margin expanded 90 basis points to 20%, driven by cost management, favorable mix, and $5 million of permanent savings. Management expects the segment to operate in a mid-18% to mid-19% EBIT margin range in 2026.
• International Welding: Sales increased about 7%, including a 5% benefit from an alloy steel acquisition and 5% favorable foreign exchange, while volumes fell about 4% amid ongoing European industrial demand challenges (partly offset by growth in Asia Pacific and the Middle East). Adjusted EBIT fell about 4% to $31 million, and margin declined 100 basis points to 11.8%. The company expects margins in the mid-11% to mid-12% range in 2026.
• Harris Products Group: Sales rose 11% on higher price and favorable foreign exchange, while volumes declined 9% due to weaker HVAC production activity. Adjusted EBIT increased 8% to $23 million, with margin down 30 basis points on lower volume and mix. The company expects an 18%-19% margin range in 2026.

2026 framework: mid-single-digit sales growth, volume improving later

Looking to 2026, Bruno said Lincoln’s framework assumes mid-single-digit sales growth, with organic growth split roughly 50/50 between volume and carryover from 2025 price actions. He said volume growth is expected to improve starting in the second quarter and through year-end, while price should be strongest in the first quarter before largely anniversarying in the second quarter.

Bruno noted the company’s 2026 price assumption does not include dynamic metal price adjustments in Harris due to volatility. When asked about Harris metals exposure, Bruno said the business has a mechanical pricing adder tied to metals such as silver and copper, and he does not expect it to be dilutive to Harris margins.

The company reiterated an intent to maintain a neutral price-cost posture and expects a mid-20% incremental operating income margin from volume growth and enterprise initiatives, resulting in modest full-year operating margin improvement. Lincoln also expects a seasonal sequential increase of about $10 million in incentive costs in the first quarter as incentive targets reset.

On capital deployment, Bruno said Lincoln plans elevated capital spending of $110 million to $130 million in 2026 across safety, growth, and productivity projects. The company expects a low-to-mid 20% tax rate and interest expense of $50 million to $55 million.

RISE strategy and 2030 targets: sales above $6B, peak 20%+ operating margin

Hedlund said Lincoln’s prior “Higher Standard” strategy concluded in 2025, and management is launching a new five-year plan called RISE, focused on reimagining work through center-led functions, innovating to differentiate (including “techquisitions” such as Inrotech), improving service levels, and investing in employee development and engagement. Executives emphasized “center-led” is intended to standardize processes while retaining local agility, rather than fully centralizing operations.

Management presented 2030 targets that include sales above $6 billion, supported by mid-single-digit organic growth and an additional 300 to 400 basis points of sales growth from acquisitions. The company targets average incremental operating income margins in the high-20% range and an average operating income margin of 19% across the cycle, with a peak consolidated operating margin of 20%+.

Bruno said the company expects to generate more than $3.7 billion in cash flows from operations through 2030 at a 100% cash conversion ratio, while targeting working capital at 16%-17% of sales. Lincoln also reiterated a balanced capital allocation approach, including a plan to return about 30% of net income through dividends, repurchase shares to prevent dilution (about $75 million per year), and buy back shares opportunistically with excess cash.

In Q&A, management said recent large automation project wins in the fourth quarter were “primarily automotive,” while noting it has not yet seen the same capital-spending release among small and mid-sized fabricators. Hedlund said stable consumables demand is an encouraging indicator, and executives described a typical pattern where improving consumables volumes can precede broader equipment and automation spending by one to two quarters.

About Lincoln Electric (NASDAQ:LECO)

Lincoln Electric Holdings, Inc (NASDAQ: LECO) is a global manufacturer and distributor of welding products, robotic welding systems, plasma and oxyfuel cutting equipment, and surface treatment systems. The company’s portfolio encompasses welding consumables such as electrodes and wires, as well as power sources, torches, and automated welding cells. Lincoln Electric also offers software solutions and training services designed to optimize productivity and quality in fabrication and manufacturing operations.

Founded in 1895 by John C.