Lincoln Electric (LECO)

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.

Company Overview

Headquartered in Ohio, Lincoln Electric (NASDAQ:LECO) manufactures and sells welding equipment for various industries.

Automation that increases efficiency and connected equipment that collects analyzable data have been trending, creating new demand. Some professional tools and equipment companies also provide software to accompany measurement or automated machinery, adding a stream of recurring revenues to their businesses. On the other hand, professional tools and equipment companies are at the whim of economic cycles. Consumer spending and interest rates, for example, can greatly impact the industrial production that drives demand for these companies’ offerings.

Competitors offering similar products include Illinois Tool Works (NYSE:ITW), Colfax (NYSE:CFX), and Fronius (private).

A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Over the last five years, Lincoln Electric grew its sales at a solid 9.8% compounded annual growth rate. Its growth beat the average industrials company and shows its offerings resonate with customers.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Lincoln Electric’s recent performance shows its demand has slowed as its revenue was flat over the last two years.

We can dig further into the company’s sales dynamics by analyzing its organic revenue, which strips out one-time events like acquisitions and currency fluctuations that don’t accurately reflect its fundamentals. Over the last two years, Lincoln Electric’s organic revenue averaged 2% year-on-year declines. Because this number is lower than its two-year revenue growth, we can see that some mixture of acquisitions and foreign exchange rates boosted its headline results.

This quarter, Lincoln Electric’s revenue grew by 5.5% year on year to $1.08 billion, missing Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 7.1% over the next 12 months. While this projection implies its newer products and services will spur better top-line performance, it is still below average for the sector.

Lincoln Electric’s gross margin is good compared to other industrials businesses and signals it sells differentiated products, not commodities. As you can see below, it averaged an impressive 35.2% gross margin over the last five years. Said differently, Lincoln Electric paid its suppliers $64.76 for every $100 in revenue.

In Q4, Lincoln Electric produced a 34.7% gross profit margin , marking a 1.6 percentage point decrease from 36.2% in the same quarter last year. Zooming out, the company’s full-year margin has remained steady over the past 12 months, suggesting its input costs (such as raw materials and manufacturing expenses) have been stable and it isn’t under pressure to lower prices.

Lincoln Electric has been a well-oiled machine over the last five years. It demonstrated elite profitability for an industrials business, boasting an average operating margin of 16.2%. This result isn’t too surprising as its gross margin gives it a favorable starting point.

Analyzing the trend in its profitability, Lincoln Electric’s operating margin rose by 2.7 percentage points over the last five years, as its sales growth gave it operating leverage.

In Q4, Lincoln Electric generated an operating margin profit margin of 17.1%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Lincoln Electric’s EPS grew at an astounding 19% compounded annual growth rate over the last five years, higher than its 9.8% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

We can take a deeper look into Lincoln Electric’s earnings quality to better understand the drivers of its performance. As we mentioned earlier, Lincoln Electric’s operating margin was flat this quarter but expanded by 2.7 percentage points over the last five years. On top of that, its share count shrank by 8.1%. These are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Lincoln Electric, its two-year annual EPS growth of 2.4% was lower than its five-year trend. We hope its growth can accelerate in the future.

In Q4, Lincoln Electric reported adjusted EPS of $2.65, up from $2.57 in the same quarter last year. This print beat analysts’ estimates by 4.2%. Over the next 12 months, Wall Street expects Lincoln Electric’s full-year EPS of $9.88 to grow 9.8%.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Lincoln Electric has shown robust cash profitability, enabling it to comfortably ride out cyclical downturns while investing in plenty of new offerings and returning capital to investors. The company’s free cash flow margin averaged 11.5% over the last five years, quite impressive for an industrials business.

Taking a step back, we can see that Lincoln Electric’s margin expanded by 3.3 percentage points during that time. This is encouraging because it gives the company more optionality.

Lincoln Electric’s free cash flow clocked in at $52.02 million in Q4, equivalent to a 4.8% margin. The company’s cash profitability regressed as it was 1.6 percentage points lower than in the same quarter last year, prompting us to pay closer attention. Short-term fluctuations typically aren’t a big deal because investment needs can be seasonal, but we’ll be watching to see if the trend extrapolates into future quarters.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Although Lincoln Electric hasn’t been the highest-quality company lately, it found a few growth initiatives in the past that worked out wonderfully. Its five-year average ROIC was 26.3%, splendid for an industrials business.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Lincoln Electric’s ROIC averaged 3.2 percentage point decreases each year. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.

Lincoln Electric reported $308.8 million of cash and $1.15 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $832 million of EBITDA over the last 12 months, we view Lincoln Electric’s 1.0× net-debt-to-EBITDA ratio as safe. We also see its $25.23 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was good to see Lincoln Electric beat analysts’ EPS expectations this quarter. On the other hand, its organic revenue missed and its revenue fell slightly short of Wall Street’s estimates. Overall, this was a softer quarter. The stock remained flat at $290.27 immediately after reporting.

Updated: February 12, 2026 at 8:14 AM EST

Before deciding whether to buy Lincoln Electric or pass, we urge investors to consider business quality, valuation, and the latest quarterly results.

Lincoln Electric isn’t a terrible business, but it isn’t one of our picks. Although its revenue growth was solid over the last five years, it’s expected to deteriorate over the next 12 months and its organic revenue declined. And while the company’s astounding EPS growth over the last five years shows its profits are trickling down to shareholders, the downside is its diminishing returns show management's prior bets haven't worked out.

Lincoln Electric’s P/E ratio based on the next 12 months is 26.8x. While this valuation is fair, the upside isn’t great compared to the potential downside. We're pretty confident there are more exciting stocks to buy at the moment.

Wall Street analysts have a consensus one-year price target of $268.89 on the company (compared to the current share price of $290.27).