Welding equipment manufacturer Lincoln Electric (NASDAQ:LECO) missed Wall Street’s revenue expectations in Q4 CY2025, but sales rose 5.5% year on year to $1.08 billion. Its non-GAAP profit of $2.65 per share was 4.2% above analysts’ consensus estimates.
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Lincoln Electric (LECO) Q4 CY2025 Highlights:
- Revenue: $1.08 billion vs analyst estimates of $1.09 billion (5.5% year-on-year growth, 1.5% miss)
- Adjusted EPS: $2.65 vs analyst estimates of $2.54 (4.2% beat)
- Adjusted EBITDA: $219.4 million vs analyst estimates of $217.3 million (20.3% margin, 1% beat)
- Operating Margin: 17.1%, in line with the same quarter last year
- Organic Revenue rose 2.5% year on year (miss)
- Market Capitalization: $16.3 billion
StockStory’s Take
Lincoln Electric's fourth quarter results were met with a positive market reaction, as management attributed performance to persistent pricing strength and disciplined cost controls despite volume headwinds. CEO Steven B. Hedlund emphasized that organic sales growth was driven by price, offsetting weaker volumes, particularly in the automation portfolio. He noted, “Our savings programs generated an incremental $31 million of permanent savings,” highlighting the company's ability to manage inflation through operational agility and supply chain management. The Americas Welding segment benefited from prior price actions, while automation experienced a challenging comparison to the prior year's record. However, the company remains encouraged by a strong order backlog in automation heading into 2026.
Looking ahead, Lincoln Electric’s guidance is anchored in cautious optimism for an industrial sector recovery, with anticipated improvements in automation and consumables volumes. Management expects a pivot to growth in automation starting in the second quarter, supported by OEM announcements of higher capital spending and a normalizing manufacturing environment. CFO Gabriel Bruno stated, “We have confidence that based on the strength of orders and backlog, particularly in our automation business, that we will see a pivot to growth beginning in the second quarter.” The company’s RISE strategy will focus on efficiency gains from organizational changes and further differentiation of its technology portfolio, with incremental operating income margin expansion targeted through 2030.
Key Insights from Management’s Remarks
Management identified pricing actions, automation backlog, and cost initiatives as central to recent performance, while highlighting sector-specific trends and evolving strategic priorities.
- Price actions offset volume declines: Management noted that higher prices, especially in Americas Welding and Harris Products Group, helped cushion the impact of weaker volumes in several end markets. This was a response to rising input costs and persistent inflation, with price levels expected to stabilize into 2026.
- Automation backlog supports outlook: Despite a year-over-year decline in automation sales due to lower capital spending and a tough comparison to last year’s record, management pointed to a strong order book and growing backlog. CEO Hedlund expects automation to return to growth as project activity increases, particularly from large customers in automotive and heavy industries.
- Cost savings and productivity initiatives: Lincoln Electric’s ongoing savings programs delivered $31 million in permanent cost reduction this year. These initiatives, combined with disciplined operational execution and supply chain agility, were credited with maintaining margin performance amid inflation and market volatility.
- Segment-specific dynamics: Americas Welding benefited from pricing and operational improvements. Harris Products Group saw price increases tied to metal input costs, while International Welding faced ongoing volume challenges in Europe but pockets of growth in Asia Pacific and the Middle East.
- Early signs of industrial recovery: Management cited an acceleration of demand in December and positive manufacturing PMI trends as indicators of a potential upturn in industrial activity. Energy and general industries in the Americas outperformed, while HVAC demand showed signs of normalization.
Drivers of Future Performance
Management’s outlook centers on a potential industrial rebound, further automation growth, and the execution of enterprise efficiency initiatives.
- Automation poised for recovery: The company expects automation sales to rebound in the second quarter, powered by a strong backlog and large project wins in automotive and heavy industries. Management sees automation’s organic growth outpacing the core business over the next five years.
- Enterprise initiatives drive margin expansion: The RISE strategy will advance the shift to center-led functions, process automation, and AI-driven efficiency, targeting a 300-basis-point increase in average operating income margin through 2030. Management anticipates these changes will generate smoother, incremental margin improvement over the strategy cycle.
- Cautious approach to input and end-market volatility: While price-cost neutrality remains a goal, management remains vigilant regarding metal market volatility and geopolitical risks, particularly in Europe. The company will adjust pricing as necessary and is focusing investments in higher-growth regions such as Asia Pacific and the Middle East.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will watch closely for (1) evidence that automation order backlog begins converting to revenue growth starting in the second quarter, (2) stabilization or improvement in consumables volumes as a signal of broader industrial recovery, and (3) early returns from the RISE strategy’s process automation and efficiency initiatives. Shifts in end-market demand and the company’s ability to navigate metal price volatility will also be important markers of progress.
Lincoln Electric currently trades at $295.59, up from $290.50 just before the earnings. At this price, is it a buy or sell? The answer lies in our full research report (it’s free).
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