Snapshot
Lincoln Electric Holdings Inc reported $1.09B of revenue in Q2 2025, up 6.6% year over year, with diluted EPS of $2.56 and an operating margin of 17.6%.
- Revenue
- $1.09B
- YoY growth
- +6.6%
- Diluted EPS
- $2.56
- Operating margin
- 17.6%
What management said
- •Our 7% sales growth reflected diligent price management, benefits from our M&A strategy, and improved volume performance from the Americas Welding and Harris Products Group segments.
- •These results demonstrate the long-term value creation we are generating from our higher standard strategy initiatives and how we are shaping the business to outperform in the next growth cycle.
- •Our earnings expanded in the quarter with adjusted earnings per share up 11% to $2.60.
- •Year-to-date cash flow generation has been strong with 100%+ cash conversion of free cash flow.
- •We have maintained top quartile ROIC performance, which reinforces our disciplined and balanced capital allocation strategy of investing in growth through the cycle and returning excess cash to shareholders.
- •As we highlighted in our earnings release, we are pleased to announce that tomorrow we expect to close our acquisition of the remaining 65% interest in Alloy Steel.
- •We've had a chance to work with them for a few months, and they are a great addition with a strong business that will be accretive to margins and earnings on day one.
- •Turning to slide four to discuss organic sales performance, we achieved an approximate 3% increase in organic sales in the quarter led by pricing actions taken to mitigate higher input costs.
- •We continue to see customers defer capital spending and maintain a wait-and-see approach due to policy uncertainty, which continues to impact our equipment and automation portfolios.
- •We are encouraged by automation's steady order rates and backlog quarter over quarter, and quoting activity remains elevated across their end markets.
- •Year-to-date automotive and energy sector projects are growing, and we saw general industries pivot to growth in the second quarter.
- •Looking at end market organic sales trends, three of five end markets grew in the quarter.
What went well
- •Second quarter sales increased 6.6% to $1.89 billion, driven by 5.2% higher price, a 3% benefit from acquisitions, and 70 basis points of favorable foreign exchange translation.
- •Adjusted earnings per share increased 11% to $2.60, and year-to-date free cash flow conversion exceeded 100%.
- •Adjusted operating income increased approximately 10% to $195 million, with adjusted operating income margin up 50 basis points to 17.9%, reflecting a 26% incremental margin.
- •The Harris Products Group delivered 19% sales growth with 11% higher volumes and a record adjusted EBIT margin of 19.4%, aided by HVAC strength and a new national U.S. retail partner rollout.
- •Volume declines narrowed to 2.3% as North American manufacturing activity and the industrial gas distribution channel proved more resilient than expected, allowing three of five end markets to grow.
- •The company maintained its neutral price-cost posture and generated $11 million from savings actions while sustaining top-quartile ROIC of 21.7%.
What went wrong
- •Total volumes declined 2.3% in the quarter, with the automation portfolio stabilizing around $215 million per quarter amid customers deferring capital spending due to policy uncertainty.
- •International Welding sales declined 2.5% as 7% lower volumes offset favorable foreign exchange, with weakness in EMEA outside core Europe and challenged conditions in Turkey.
- •Gross profit margin declined 30 basis points to 37.3%, pressured by lower volumes and an $8.5 million LIFO charge in the quarter.
- •Americas Welding adjusted EBIT margin declined 130 basis points to 18.6% due to higher incentive compensation, the acquisition impact, and higher corporate expense allocation.
Guidance changes
| Metric | Period | Previous | Current | Change |
|---|---|---|---|---|
| Full-year adjusted operating income margin | FY2025 | Steady versus prior year | Steady to slightly up versus prior year with a high 18% incremental margin | Raised |
| Acquisition contribution to sales growth | FY2025 | Lower (pre-Alloy Steel) | Approximately 270 basis points, with Alloy Steel contributing $20M-$25M for the balance of the year | Raised |
| Six-quarter savings program total | By year-end 2025 | Not specified | Approximately $60 million at a 50/50 temporary and permanent split | Reaffirmed |
| Alloy Steel EPS contribution | Balance of FY2025 | Not included | $0.07 of EPS | Added |
| Incremental pricing impact | Q3 2025 | N/A | Additional 100-200 basis points from second-quarter actions | New |
Performance breakdown
| Metric | YoY change | Reason |
|---|---|---|
| Total sales | +6.6% to $1.89 billion | 5.2% higher price, 3% from acquisitions, and 70 bps favorable FX, partially offset by 2.3% lower volumes |
| Adjusted EPS | +11% to $2.60 | Profit expansion including $0.03 from favorable FX and $0.06 from share repurchases |
| Americas Welding sales | +approximately 7% | 6.5% higher price and ~5% Van Air acquisition contribution, offset by ~3% lower volumes |
| International Welding sales | -2.5% | ~4% favorable FX offset by 7% lower volumes on challenged EMEA demand and tough prior-year project comparisons |
| Harris Products Group sales | +19% | 11% higher volumes from HVAC strength and retail channel expansion plus 7% higher price |
| Adjusted operating income | +approximately 10% to $195 million | Cost management, savings actions, and operating leverage on SG&A offsetting lower volumes |
Earnings call themes & trends
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Automation demand | Customers deferring capital spending amid policy uncertainty | Stabilized around $215 million per quarter with steady order rates, elevated quoting activity, and growing backlog | Stabilizing |
| Volume elasticity from pricing | Feared volume would fully offset price increases, leaving organic flat | Volume proved less negative than feared, yielding net organic growth | Improving |
| Price-cost management | Neutral price-cost posture | Maintained neutral price-cost with mid-single-digit pricing now at higher end of range | Stable |
| Savings program | 65% from temporary cost actions | Shifting toward permanent structural savings as temporary actions anniversary; targeting 50/50 split by year-end | Shifting to permanent |
| Heavy industries | Challenged | Incrementally improving on easier comparisons, with ag machinery destocking setting up a 2026 recovery | Improving |
Q&A summary
What are you seeing in orders and customer demand, particularly July trends informing the second-half outlook?
July order trends are holding, which gave confidence to update assumptions. General industries strengthened as Q2 wound up while heavy industries remained down low teens, and automotive saw a bit more volume pressure progressively into Q3.
What is the underlying organic demand in Harris once you back out the inventory stocking for the new retail customer?
Removing the initial stocking for the new retail customer, Harris volumes are more flattish progressively into the third quarter.
With more tariff certainty and the One Big Beautiful Bill, have you seen behavior changes, and what are customers waiting for to execute on elevated quoting activity?
As the administration provides clarity on country-by-country tariff rates, the rules of the road are firming up, which should address the wait-and-see attitude; the bill should primarily benefit general industries where smaller fabricators will need to invest in automation.
Can you expand on the $10M-$15M of second-half savings from permanent cost actions?
The actions reflect a continued focus on evolving the operating model, whether through organizational changes or shaping facilities and efficiencies for the long term.
Should we expect normal third-quarter revenue seasonality of down low single digits sequentially?
That is a fair observation; progressing in normal seasonality is a good assumption, with the caveat that Q3 will see sell-through replenishment of the new retail customer rather than the one-time load-in seen in Q2.
What should we expect for pricing in Q3 and will you need to go back to the market for more price given steel and copper tariffs?
Q3 should see another 100-200 basis points of incremental pricing from second-quarter actions; pricing already covers announced steel and aluminum tariffs, and further actions will only be taken to maintain the neutral price-cost posture as country-by-country tariffs finalize.