Snapshot
Lincoln Electric Holdings Inc reported $1.06B of revenue in Q3 2025, up 7.9% year over year, with diluted EPS of $2.21 and an operating margin of 16.6%.
- Revenue
- $1.06B
- YoY growth
- +7.9%
- Diluted EPS
- $2.21
- Operating margin
- 16.6%
What management said
- •A reconciliation of non-GAAP measures to the most comparable GAAP measure is found in the financial tables in our earnings release, which again you can find on our Investor Relations website at lincolnelectric.com.
- •Sales increased 8% driven by pricing benefits from our M&A strategy and resilient demand for short cycle portions of our product portfolio in the Americas Welding and Harris Products Group segments.
- •While we are still navigating a period of challenged capital spending in our automation portfolio and sluggish demand in the EMEA region, our results demonstrate the strength of our operating model.
- •This resulted in both higher gross profit and operating income margins, a 15% increase in our adjusted EPS performance and record cash flow generation with 149% cash conversion.
- •In the third quarter and into October, organic sales increased 5.6% on higher price and narrowing volume declines.
- •Volumes reflected ongoing stabilization in the demand for our short cycle consumables, most notably in Americas and the Harris Products Group segments as well as in our North American industrial gas distribution channel.
- •An encouraging area of improvement was the low single digit percentage volume growth we achieved in welding equipment in the Americas which has shown continued momentum in October.
- •Our automation portfolio continues to be challenged from deferred capital spending in the automotive and heavy industry sectors.
- •We were encouraged by a broad increase in automation order rates in late September and through October.
- •Looking at end market organic sales trend, we continue to see three of our five end markets representing approximately 60% of revenue achieving steady to higher organic sales growth in the quarter.
- •While largely price driven, we did achieve volume growth across general industries, the HVAC sector, and in midstream energy construction infrastructure.
- •Organic sales were steady in the quarter from a high single digit % increase in Americas, which was offset internationally in heavy industries.
What went well
- •Third quarter sales increased 7.9% to $1,061 million, driven by 7.8% higher price, a 1.7% acquisition benefit, and 60 basis points of favorable foreign exchange translation.
- •Adjusted EPS increased 15% to $2.47, and the company generated record cash flow from operations with a 149% cash conversion ratio in the quarter.
- •Gross profit margin expanded 90 basis points to 36.7%, and adjusted operating income increased approximately 9% to $185 million with a 10 basis point margin improvement to 17.4%.
- •The company generated an incremental $8 million in permanent savings and achieved its targeted neutral price-cost position while sustaining top-quartile ROIC, which rose to 22.2%.
- •Welding equipment in the Americas grew low single digits, the first equipment growth since 4Q 2023, and automation order rates broadened encouragingly in late September through October.
- •The company announced its 30th consecutive annual dividend increase of 5.3% and concluded its five-year Higher Standard strategy on track, with operating income margin up 500 basis points since 2020 and earnings more than doubled.
What went wrong
- •Total volumes declined 2.2%, with automation generating approximately $200 million, slightly below expectation due to project timing shifting into the fourth quarter.
- •SG&A expense increased 11% or approximately $21 million versus a challenging prior-year comparison that included lower employee costs and a $7 million long-term incentive adjustment.
- •International Welding volumes fell 4% on continued challenged European demand, and Americas Welding adjusted EBIT margin declined 60 basis points to 18.2% on tough prior-year comparisons and lower automation volumes.
- •A $5 million LIFO charge weighed on gross profit, and the reported effective tax rate rose 250 basis points to 26.1% from a $9 million special item tax expense tied to the One Big Beautiful Bill Act election.
Guidance changes
| Metric | Period | Previous | Current | Change |
|---|---|---|---|---|
| Top-line and margin assumptions | FY2025 | Steady to slightly up margin (Q2 framework) | Maintained, with modest sequential operating margin improvement from Q3 to Q4 | Maintained |
| Interest expense | FY2025 | Lower (prior assumption) | Low $50 million range due to Alloy Steel borrowings | Increased |
| Cash conversion | FY2025 | Approximately 100% | Above 100% to align with performance | Increased |
| Q4 automation sales | Q4 2025 | N/A | Approximately 15%-20% higher sequentially but still below prior-year level | New |
| Annual dividend payout rate | Early 2026 | Prior rate | 30th consecutive increase of 5.3% | Increased |
Performance breakdown
| Metric | YoY change | Reason |
|---|---|---|
| Total sales | +7.9% to $1,061 million | 7.8% higher price, 1.7% from acquisitions, and 60 bps favorable FX, partially offset by 2.2% lower volumes |
| Adjusted EPS | +15% to $2.47 | Margin expansion, a lower adjusted effective tax rate of 21.1%, and a $0.07 share-repurchase benefit, less $0.01 FX headwind |
| Americas Welding sales | +approximately 9% | 9.6% higher price and 1.4% Van Air contribution, offset by ~2% lower volumes |
| International Welding sales | +1.6% | ~4% Alloy Steel benefit and 2% favorable FX, offset by 4% lower volumes on challenged European demand |
| Harris Products Group sales | +15% | Nearly 12% higher price and 2% higher volumes on HVAC strength and expanded retail presence |
| Automation sales | Below prior year at approximately $200 million | Deferred capital spending in automotive and heavy industry plus project timing shifting to Q4 |
Earnings call themes & trends
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Automation orders | Multiple quarters of wait-and-see customer posture | Broad-based acceleration in late September and October, expected to benefit 2026 more than Q4 | Improving |
| Short-cycle consumables | Stabilizing | Continued stabilization and volume growth, viewed as a leading indicator of capital investment ahead | Improving |
| European demand | Challenged | Still challenged, with cautious optimism on defense spending commentary but no order translation yet | Stable to cautious |
| Price-cost and pricing | Neutral price-cost; mid-single-digit pricing maturing | Neutral position achieved; Americas price fully matured in Q3 and expected to hold sequentially in Q4 | Stable |
| Cycle positioning | Navigating downturn | Well positioned for recovery, expecting a slow build of volume growth rather than a sudden surge | Improving |
Q&A summary
How are automation and broader order trends progressing into the fourth quarter, and what about HVAC?
Automation orders are accelerating broadly and core Americas business is showing progressive strength, though HVAC production, about 10%-15% of the business, is expected to soften in Q4 on traditional seasonality.
How should we think about cycle positioning and demand recovery into 2026 given equipment grew for the first time since 4Q 2023?
The company is well positioned as markets expand, with consumables a positive short-cycle indicator and good automation equipment activity, but wants more consistency in order patterns before pointing to a consistent growth pattern.
Is there a consistent customer rationale for finally moving forward with automation orders after multiple quarters of pause?
The acceleration is broad-based, not just automotive, with mid-teens uplift in October model launch activity versus April; differentiated high-quality solutions and easier reshoring confidence are driving more commitment to capital.
How should we think about incremental margins as growth shifts from price-driven to volume-driven?
Current high-teens incremental margins should move to mid-20% as volumes approach mid-single-digit growth, with upside to low-to-mid 30% from automation and international as growth accelerates.
What is your view on a European volume inflection given a competitor's more bullish commentary?
European defense spending commentary is encouraging but remains just commentary, not translating into order intake; the company is cautiously optimistic but not counting on or planning for a European recovery.
Should LIFO charges be contemplated in 2026, and how should we think about temporary cost reversals on volume recovery?
LIFO accounting resets every year based on inventory valuation and cannot be projected to 2026 until inflation trends are seen; temporary cost savings are built into the model and will come back as volume improves within the incremental framework.