Skip to content
    LECO
    Earnings call· Jun 2026(Q2 FY26)

    LINCOLN ELECTRIC HOLDINGS Q2 FY26 earnings call LECO

    Jul 30, 2026 Source

    Executive summary

    Lincoln Electric Q2 FY26 — Record Performance Driven by Volume Inflection and Strong Americas Demand

    Lincoln Electric delivered a strong second quarter, marking an inflection to volume growth after nine quarters of compression, particularly in the Americas. The company achieved record sales, adjusted operating income margin, adjusted EPS, and cash flows, driven by volume leverage and improved price-cost position. Management expressed confidence in the durability of an industrial recovery in the Americas, supported by strong order rates and a record backlog, while navigating persistent inflation and geopolitical headwinds in Europe and the Middle East.

    Highlights

    5

    • Consolidated organic sales increased 10% with volume growth across all three product areas.

    • Adjusted operating income margin improved 50 basis points to 18.4% with a 22% incremental margin.

    • Adjusted earnings per share increased 13% to $2.93.

    • Generated a record $254 million in cash flows from operations, resulting in 138% cash conversion for the quarter.

    • Americas Welding organic sales grew 11%, with equipment up high teens percent and consumables up high single-digit percent.

    Concerns

    5

    • Gross profit margin compressed 50 basis points to 36.8% due to persistent inflation, unfavorable mix, and a $4.2 million LIFO charge.

    • International Welding volumes compressed approximately 5% on slowing EMEA demand and weak industrial activity in Europe.

    • International Welding adjusted EBIT decreased 13% to $27 million, with margin declining 210 basis points to 10.6%.

    • The Middle East conflict is estimated to represent a $6 million to $7 million sales headwind per quarter in the International Welding segment.

    • Transportation sales declined mid-single-digit percent, offset by lower factory production activity and automation project timing.

    Guidance & targets

    11
    CategoryTargetConfidence
    Full year net sales growth
    low double-digit percent rate
    high materiality
    High
    Full year organic sales growth
    high single-digit to low double-digit percent rate
    high materiality
    High
    Full year LIFO headwind
    $10 million
    medium materiality
    High
    Price-cost position
    neutral
    high materiality
    High
    SG&A expense run rate
    $210 million to $215 million
    low materiality
    Medium
    Corporate expense run rate
    $1 million to $2 million
    low materiality
    Medium
    Americas Welding EBIT margin
    19% to 20%
    medium materiality
    High
    International Welding margin performance
    10% to 11% range
    medium materiality
    Medium
    Harris segment operating margin
    18% to 19% range
    medium materiality
    Medium
    Cash conversion
    100%
    medium materiality
    High
    Adjusted operating income margin performance
    higher versus the prior year
    high materiality
    High

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    Americas Welding
    Sales increased due to higher volumes across all three product areas, led by equipment, and price actions. Adjusted EBIT improved significantly due to higher sales and an improved cost position, narrowing unfavorable price costs.
    Volume growth: 7%Price: 4%Favorable foreign exchange translation: 40 bpsEquipment volume growth: low double-digit percentAdjusted EBIT margin: 19.7% (+110 bps)
    		—11%—$158 million
    International Welding
    Sales increased driven by the Alloy Steel acquisition, higher price, and favorable foreign exchange, but volumes compressed due to slowing EMEA demand and weak industrial activity in Europe. Adjusted EBIT and margin declined due to lower volumes, despite benefits from the acquisition and narrowing price-cost headwinds.
    Volume compression: approximately 5%Adjusted EBIT margin: 10.6% (-210 bps)
    		—4.5%—$27 million
    Harris Products Group
    Sales increased significantly, led by higher price, though price moderated sequentially. Adjusted EBIT and margin improved due to SG&A leverage, higher sales dollars, and a tariff refund. Volumes were challenged by tough prior year comparisons and retail sector softness.
    Price: 34% higherAdjusted EBIT margin: 20.4% (+100 bps)
    		—27%—$42 million

    Operational metrics

    20
    Consolidated organic sales growth
    10%
    Q2 FY26

    Led by strength in the Americas Welding segment.

    Automation sales
    $229 million
    Q2 FY26

    Equipment and automation volumes increased mid-single-digit percent.

    Equipment and automation volumes growth
    mid-single-digit percentincreased
    Q2 FY26

    Resulted in automation sales of $229 million.

    Consumable volumes growth
    low single-digit percentgrew
    Q2 FY26

    Aligned with general industrial production activity.

    Gross profit margin
    36.8%compressed 50 basis points
    Q2 FY26

    Compressed due to persistent inflation, unfavorable mix, and a $4.2 million LIFO charge.

    Price-cost gap
    10 basis pointsheadwind
    Q2 FY26

    Narrowed from a recent price increase and a tariff refund.

    SG&A expense as percent of sales
    18.4%improved 100 basis points
    Q2 FY26

    Primarily from higher spending to support strategic initiatives IT investments and unfavorable foreign exchange translation.

    Adjusted operating income margin
    18.4%improved 50 basis points
    Q2 FY26

    On higher sales and an improved price cost position.

    Incremental margin
    22%
    Q2 FY26

    Flow-through on adjusted operating income.

    Adjusted diluted EPS
    $2.93increased 13%
    Q2 FY26

    Includes a $0.01 headwind from foreign exchange translation and a $0.05 benefit from share repurchases.

    Cash flows from operations
    $254 millionrecord
    Q2 FY26

    Reflecting strength in earnings and a 100 basis point improvement in working capital.

    Cash conversion
    138%
    Q2 FY26

    Resulted from strength in earnings and working capital improvement.

    Cash conversion YTD
    95%
    YTD Q2 FY26

    On track to achieve 100% target for the year.

    Capital expenditures
    $31 million
    Q2 FY26

    Investment in CapEx.

    Capital returned to shareholders
    $120 million
    Q2 FY26

    Executing on capital allocation strategy.

    Adjusted Return on Invested Capital (ROIC)
    23%improved
    Q2 FY26

    Improved from prior period.

    RISE strategy margin improvement target
    100 to 125 basis points
    over 5 years

    Targeted improvement in the margin profile of the business through enterprise initiatives.

    Middle East conflict sales headwind
    $2 million to $3 million
    Q2 FY26

    Modest sales headwind on a consolidated basis, more favorable than anticipated.

    LIFO charge
    $4.2 million
    Q2 FY26

    Offset benefits from price increases and tariff refund.

    Tariff refund impact on Harris EBIT margin
    100 basis pointimprovement
    Q2 FY26

    Aided profitability improvement in the Harris segment.

    Industry KPIs

    4
    MetricValueDetails
    Tariff cost impact100 basis pointbps
    Parts aftermarket businesslow single-digit percent%
    Incremental margin operating leverage22%%
    Order backlog order intake by segmentrecord

    Orderbook & backlog

    2
    Total backlogrecordQ2 FY26
    Automation backlogrecord levelsQ2 FY26

    Deals & partnerships

    1
    Alloy SteelAcquisition contributing to International Welding sales growth.

    The Alloy Steel acquisition provided a 1.5% benefit to consolidated sales and contributed to the 4.5% sales increase in the International Welding segment.

    Risks & headwinds

    5
    Persistent inflationongoing

    ongoing

    Mitigation: Monitoring for additional price actions; implemented price actions to achieve neutral price-cost position for H2.

    Middle East conflict sales headwindper quarter (H2 FY26)

    $6 million to $7 million per quarter

    Mitigation: Team actively engaged in region to support projects and address needs; monitoring progression.

    Volatility in commodity costs, evolving trade policies, and duration of Middle East conflictFY26

    added risk to assumptions

    Mitigation: Global team is monitoring and actively working to mitigate.

    Soft industrial trends in EuropeQ2 FY26 and ongoing

    persistently soft

    Mitigation: International Welding margin performance expected to remain challenged.

    Retail sector challengesQ2 FY26 and ongoing

    soft consumer trends

    Mitigation: Anticipate HVAC to gain momentum in H2 and benefit from easier prior year comparison in Q4.

    What to watch in Q3 FY26

    5

    Price-cost position

    Q3 and Q4 FY26
    Current10 bps headwind (Q2 FY26)
    Targetneutral

    Why it matters

    Impacts profitability and margin trajectory, key to achieving full-year targets.

    Our price actions keep us on track to achieve a neutral price cost position for the third and fourth quarters.

    Q&A highlights

    7

    Clarification on the change in price-cost assumptions from neutral for the full year to neutral for the second half, implying a positive second half.

    Management confirmed the change, stating they are pointing to price-cost neutral for the back half, ending Q2 with a 10 basis point headwind, which was better than expected. They anticipate executing pricing strategies to achieve neutrality for the second half.

    “Yes, that is a change. We are pointing to price cost neutral for the back half. We ended the second quarter at 10 basis points of a headwind, which is actually better than we expected, but we expect to execute on our pricing strategies to achieve a neutral price cost for the second half of the year.”

    asked by Oliver Z Jiang · answered by Gabriel Bruno

    2 min read5 chapters

    Detailed Narrative

    01

    Volume Inflection and Capital Spending Recovery

    The second quarter marked a significant inflection point for Lincoln Electric, ending nine consecutive quarters of volume compression. This turnaround was primarily driven by strengthening demand in the Americas, with equipment and automation volumes increasing mid-single-digit percent, and consumable volumes growing at a low single-digit rate. The company observed increased capital spending from direct OEM and rental customers, indicating renewed confidence in industrial production activity.

    02

    Geographic and End Market Performance

    Geographically, organic growth was strongest in the Americas and parts of Asia Pacific, including China, India, and Vietnam. Europe remained challenging due to soft industrial trends. On an end-market basis, general fabrication organic sales surged over 30%, benefiting from improved industrial production in the Americas and commercial HVAC demand. Heavy Industries and nonresidential structural steel also saw mid-single-digit growth, while energy sales held up well with nearly 30% growth in Americas Welding.

    03

    Price-Cost Dynamics and Inflation Management

    Lincoln Electric narrowed its price-cost gap to a 10 basis point headwind in Q2, an improvement attributed to recent price increases and a tariff refund. However, persistent inflation, unfavorable mix, and a $4.2 million LIFO charge (expected to be a $10 million headwind for the full year) impacted gross profit margin. The company plans further price actions to achieve a neutral price-cost position for the third and fourth quarters, actively monitoring input costs and trade policies.

    04

    RISE Strategy and Operational Initiatives

    The company's RISE strategy is actively driving productivity, efficiency, and commercial effectiveness across the business. These enterprise initiatives are expected to contribute 100 to 125 basis points of margin improvement over a five-year period. Management emphasized the broad range of initiatives aimed at improving factory productivity and optimizing SG&A spend, underscoring a commitment to continuous operational enhancement.

    05

    Automation and Transportation Sector Outlook

    Automation sales reached $229 million in the quarter, with broad-based strengthening in demand across most segments. The company noted significant quoting activity and a record backlog in automation, particularly with increasing engagement in the automotive sector for future program years (2027 and beyond). This suggests a favorable progression in orders within transportation, which is expected to improve during the balance of the year.

    AI-generated summary of the company’s earnings call. Not investment advice.