Lincoln Electric Q1 Earnings Call Highlights

Key Points

• Record quarterly sales of $1.121 billion (up ~12%) and adjusted EPS of $2.50 (up 16%) drove solid results, though gross margin fell 80 bps to 35.6% due to lower volumes, timing of price-cost recovery and an ~$1M LIFO charge while adjusted operating income rose 11.5%.
• Demand was strongest in the Americas with consumables resilient and improving European orders, but international automation weakness and the Middle East conflict trimmed roughly $8 million to $10 million of sales per quarter while Americas backlog and orders showed signs of recovery.
• Management raised its 2026 net sales growth assumption to a “high single‑digit” range driven by price actions, kept volume guidance at low single‑digit growth, expects price‑cost neutrality by Q3, and returned $101 million to shareholders while investing in the RISE cost/productivity program.

Lincoln Electric NASDAQ: LECO reported first-quarter fiscal 2026 results highlighted by record quarterly sales and higher adjusted earnings per share, while management pointed to a more complex operating environment shaped by geopolitics, trade negotiations, and shifting input costs.

Record sales, higher adjusted EPS, and steady operating margin

Chairman and CEO Steven B. Hedlund said the company delivered “solid results led by record quarterly sales and adjusted EPS performance,” while “navigating heightened operating complexity from geopolitics and evolving trade negotiations.” He added that Lincoln remained focused on near-term agility while continuing to invest for long-term growth.

Chief Financial Officer Gabriel Bruno said first-quarter sales increased about 12% to $1.121 billion, driven primarily by “approximately 10% higher price,” 2% favorable foreign exchange translation, and a 1.6% contribution from the Alloy Steel acquisition. Those gains were partially offset by 2.6% lower volumes.

Gross profit rose about 9% to $399 million, but gross margin declined 80 basis points to 35.6%. Bruno attributed the margin decline to lower volumes, timing of price-cost recovery, and “an approximate $1 million LIFO charge.” He said price-cost was unfavorable by 90 basis points in the quarter, and management implemented new pricing actions in the Welding segment set to take effect in early May.

Adjusted operating income increased 11.5% to $189 million, and adjusted operating margin was flat year over year at 16.9%. Bruno said favorable SG&A leverage helped offset the impact of lower volumes and an unfavorable price-cost position.

Diluted earnings per share increased 18% to $2.47. On an adjusted basis, EPS increased 16% to $2.50, including benefits of $0.04 from foreign exchange translation and $0.05 from share repurchases, according to Bruno.

Demand trends: Americas strength, improving Europe, and Middle East headwinds

Hedlund said demand trends were strongest in the Americas, and noted consumables as “the most resilient product category,” supported by factory activity and infrastructure investments tied to energy and data centers, which helped offset slower auto production. He also said improving order momentum in the Americas through April aligned with “3 consecutive months of expanding manufacturing PMI data.”

In automation, Hedlund said global automation sales were $210 million versus $215 million a year earlier, pressured by international markets and challenging prior-year comparisons. However, he and Bruno both pointed to improving Americas order rates and backlog levels into April, which management believes can support modest volume growth starting in the second quarter, with further improvement in the back half if conditions hold.

Internationally, Hedlund said the company saw “a broad improvement in sales from European customers,” with organic sales turning to growth in Northern, Eastern and Central Europe, as well as Turkey. India and Australia also improved, he said. The primary headwind internationally was tougher comparisons in regional automation and energy projects and, “to a lesser extent, the Middle East conflict.”

Hedlund estimated a roughly $8 million sales impact in the quarter from the Middle East conflict as several customers suspended activity, calling the region “a relatively small portion of sales” on a consolidated basis. Bruno later said the company expects the conflict to weigh on sales by $8 million to $10 million per quarter while it persists, split evenly between the Americas Welding and International Welding segments.

In response to analyst questions about cycle positioning, Hedlund described Lincoln’s stance as “cautiously optimistic,” citing encouraging customer conversations and order rates in the Americas alongside choppiness in Europe and uncertainty in the Middle East.

End-market performance: general fabrication stood out

Hedlund said three of Lincoln’s five end markets posted flat-to-higher organic sales growth in the quarter, led by “high 30% growth rate in general fabrication,” reflecting accelerated factory and fabrication activity in the Americas and strength in data center and HVAC projects.

Heavy industries grew, driven by off-highway activity globally, Hedlund said, adding that both construction and agricultural equipment increased “across a broad mix of solutions, including automation.”

Energy was steady overall, with Hedlund describing a split between “a high teens% growth rate in Americas” offset by weaker international results. He said Lincoln remains bullish on energy, citing a “strong pipeline of pending LNG projects” and broader infrastructure needs tied to data center investments.

Meanwhile, non-residential structural steel and transportation were identified as challenged end markets. Hedlund said non-residential weakness was largely international, while transportation softness was broader and tied to lower capital spending and slightly lower production rates.

Segment results: Americas welding steady, International pressured, Harris surged on price

Americas Welding sales increased about 8%, driven by nearly 8% higher price and 1% favorable FX, while volume declines narrowed to 40 basis points as orders accelerated across product areas. Bruno said the company expects volumes “to inflect to modest growth in the Q2.”

Americas Welding adjusted EBIT increased about 3% to $128 million, but adjusted EBIT margin declined 100 basis points to 17.2%, driven by timing of price-cost recovery and higher corporate expense allocations. Bruno said the company expects Americas Welding margins to be in the “mid-18% to mid-19%” range for the rest of the year.

International Welding sales rose about 4% on FX and the Alloy Steel acquisition, but volumes fell 10%, “primarily from automation,” and also reflected a temporary decline in activity due to the Middle East conflict. Adjusted EBIT decreased 1.5% to $23 million, and margin declined 50 basis points to 9.7%. Bruno said International margins should improve sequentially but remain “in the 11% range until conditions improve in the Middle East.” He also told analysts the largest driver of the volume decline was the timing of automation projects and tough comparisons.

At Harris Products Group, sales rose 42%, led by 41% higher price tied to efforts to offset “record high metal costs,” particularly silver and copper. Bruno said Harris achieved a neutral price-cost target in the quarter. Adjusted EBIT rose about 68% to $41 million and margin improved 330 basis points to 21.2%, helped by SG&A leverage and favorable mix. Management said Harris pricing is expected to moderate from first-quarter levels, and the segment is expected to operate in the 19% to 20% margin range at current metal prices.

Cash flow, capital allocation, and updated 2026 assumptions

Lincoln generated $102 million in operating cash flow, which Bruno said was lower due to working capital usage. The company increased inventories temporarily to support customer service levels during product transitions and to respond to strengthening demand, particularly in the Americas. Bruno said the company expects to reduce inventory levels in the second half of the year and remains “anchored on 100% cash conversion.”

The company invested $39 million in capital expenditures and returned $101 million to shareholders through dividends and share repurchases. Bruno said adjusted return on invested capital remained solid at 21.5%.

For 2026, Bruno said Lincoln increased its net sales growth assumption to a “high single-digit % range,” reflecting newly announced price actions taken to offset rising input costs. The company did not change its original volume growth assumption of low single-digit growth, citing both the early stage of the year and uncertainty around the balance between stronger Americas orders and lower Middle East sales. Lincoln maintained other full-year assumptions for operating margin improvement and incremental margins.

On price-cost timing, Hedlund said the company saw an inflection in input costs late in the first quarter, followed by a lag in implementing pricing. Bruno told analysts he expects the company to reach price-cost neutrality “as we enter the third quarter,” with a partial benefit in the second quarter and a full impact in the third.

Hedlund also pointed to cost and productivity initiatives under the company’s newly launched RISE strategy, including sourcing leverage, supply chain planning improvements to reduce inventory needs over time, and SG&A productivity initiatives, which management said support its longer-term incremental margin targets.

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.

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