Lincoln Electric (LECO) Q2 FY26 earnings call: guidance and Q&A

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

Inquiring if there's a mix shift towards smaller, pre-engineered automation projects, which could be more favorable.

Management noted broad-based strengthening in automation demand, particularly in general industries where pre-engineered sales and cobots are recorded. They are seeing encouraging signs of customer willingness to invest capital, leading to optimism for both overall demand and favorable mix.

“Yes, Oliver, we've seen really broad-based strengthening in demand profile for the automation business. I think all of our segments. 4 out of the 5 segments have gotten better for automation, in particular, general industries, which is where a lot of the pre-engineered sales than the cobots and the like are recorded and we're seeing really encouraging signs of willingness of customers to invest capital in their businesses.”

asked by Oliver Z Jiang · answered by Steven Hedlund

Seeking quantification of the tariff refund and how the $10 million full-year LIFO headwind will flow through the second half.

Management clarified that the tariff impact was mainly Section 232, and expected refunds were incorporated into pricing actions. They highlighted a ~100 bps EBIT margin improvement for Harris due to a tariff refund in Q2, but do not expect Harris to sustain a 20% EBIT level. For LIFO, they reiterated the $10 million full-year headwind based on inflationary pressures through June.

“The only place that we really wanted to call out the impact of tariffs was on Harris because it was about 100 basis point EBIT margin improvement in the quarter for Harris. So as we look forward to the back half of the year, I would not expect Harris to continue to perform at a 20% EBIT level.”

asked by Mircea Dobre · answered by Steven Hedlund

Questioning the $6 million to $7 million per quarter headwind estimate for the Middle East, asking for details on business impact (project delays, verticals, countries, destocking).

Management stated the Q2 headwind was $2 million to $3 million, more favorable than the initial $8 million to $10 million expectation. The revised estimate is $6 million to $7 million per quarter. They noted their team is actively engaged in the region to support projects and address needs, indicating it's more about project progression than specific verticals or destocking.

“So we entered Q2 with a framework of we expected a headwind of $8 million to $10 million per quarter. we actually ended up much more favorably in the second quarter than we expected. We were -- I think we had a headwind of $2 million to $3 million in the second quarter. So we have actually reduced the level of expectation of impact in Middle East for what we've seen to $6.6 million to $7 million versus $8 million to $10 million.”

asked by Mircea Dobre · answered by Gabriel Bruno

Seeking more insight into the mid-30% growth rate in general fabrication and expected run rate for the back half of 2027.

Management attributed the growth to accelerating momentum in standard welding equipment, progressing throughout Q2 and into July. This reflects increased capital investment confidence and progressive strength in production activity, particularly in general industries. They have record backlog in automation, primarily in the Americas, giving confidence in continued momentum.

“We had been pointing to very high levels of backlog. Now we're pointing to record levels of backlog in the automation side of our business. You can be reminded that 80% of our automation business is within the Americas. So that gives us confidence that we're seeing progressive strength in production activity, particularly in general industries, broad based as well as conviction and investments.”

asked by Jacob Moran · answered by Gabriel Bruno

Asking which initiatives within the RISE 2030 strategy are the biggest self-help margin contributors, independent of volume, for the back half and into 2027.

Management stated there's a range of initiatives across factory productivity, SG&A efficiency, and commercial effectiveness, making it hard to pinpoint one. They have confidence in capturing opportunities across all areas, aiming for a steady progression of 100 to 125 basis points of margin improvement over five years.

“Yes. There's a whole range of initiatives that we're driving in the business that are oriented around trying to improve productivity in the factories, efficiency and our SG&A spend, commercial effectiveness. It's hard to point to any one of them and signal which one is most important because we think there's opportunities across all 3 of those areas.”

asked by Jacob Moran · answered by Steven Hedlund

Update on expectations for automation in the transportation sector for the back half, specifically regarding plant refreshment and larger customer activity.

Management noted significant quoting activity and record backlog across automation. They are seeing more acceleration in engagement on the automotive side for program years 2027 and beyond, pointing to potentially more favorable progression in actual orders. They expect automation to push high single-digit to low double-digit year-over-year sales improvement.

“We are starting to see more activity that points to potentially more favorable progression in actual orders within the automotive sector. So that's a favorable trending. We actually saw a better performance in transportation, including think about equipment as well as automation into the second quarter from the first we look to automation to be pushing the high single-digit, low double-digit trajectory on year-over-year sales improvement.”

asked by Adam Farley · answered by Gabriel Bruno