What went well
  • The quarter marked a solid inflection to volume growth after nine quarters of compression, with organic sales up 10% and volume growth across all three product areas, led by the Americas Welding segment.
  • Lincoln Electric delivered record performance across sales ($1.22 billion, +12%), adjusted operating income margin (18.4%, +50 bps), adjusted EPS ($2.93, +13%), and cash flow, with GAAP diluted EPS up 12.5% to $2.88.
  • Operating cash flow was a record $254 million (138% cash conversion in the quarter, 95% year-to-date), and adjusted return on invested capital improved to a top-quartile 23%.
  • Americas Welding growth accelerated and broadened across most end markets, with equipment organic sales up high-teens percent and a record backlog, especially in automation (~80% of which is Americas).
  • Four of five end markets grew (~80% of revenue), including general fabrication up over 30%, energy/oil-and-gas up nearly 30% in Americas Welding, and improving capital-spending confidence in equipment and automation.
  • Management raised full-year net sales growth guidance to a low-double-digit rate and returned $120 million to shareholders through a higher dividend and buybacks.
What went wrong
  • International Welding adjusted EBIT fell 13% to $27 million (margin down 210 bps to 10.6%) as volumes compressed ~5% on weak European industrial demand and a first-quarter buy-ahead pull-forward.
  • Gross profit margin compressed 50 basis points to 36.8%, as a narrowed price-cost gap was offset by persistent inflation, unfavorable mix, and a $4.2 million LIFO charge (now a $10 million full-year headwind).
  • Harris Products Group volumes were challenged by tough HVAC comparisons and a prior-year retail customer inventory load-in, with a soft retail/consumer backdrop.
  • The Middle East conflict is expected to be a $6-$7 million per-quarter headwind in International Welding as fighting resumes (though better than the prior $8-$10 million estimate).
  • Price-cost remained slightly negative at -10 basis points, and persistent inflation in energy, logistics, and certain metals continues to require monitoring for additional pricing actions.

Guidance Changes

MetricPeriodCurrent guidance
Net sales growthFY2026Low double-digit percent (raised), with seasonal progression
Organic sales growthFY2026High single-digit to low-double-digit percent (~1/3 volume, ~2/3 price)
Price-cost position2H 2026Neutral in the second half (Q2 ended at -10 bps)
Incremental margin2H 2026Mid-20% percent
Americas Welding EBIT margin2H 202619%-20%
International Welding EBIT marginFY202610%-11%
Harris Products Group EBIT margin2H 202618%-19% (at current metal prices)
LIFO / SG&A / Middle EastFY2026LIFO ~$10M headwind; SG&A ~$210-$215M/quarter; Middle East ~$6-$7M/quarter headwind

Performance Breakdown

MetricYoYNote
Net sales +12% to $1.22B ~8% price, 2% volume, 1.5% from the Alloy Steel acquisition, and 40 bps favorable FX; organic sales up 10%.
Adjusted operating income / margin +15% / +50 bps to 18.4% Volume leverage and an improved price-cost position; 22% incremental margin.
Adjusted EPS +13% to $2.93 Higher sales and improved cost profile; $0.05 buyback benefit, $0.01 FX headwind; GAAP EPS $2.88 (+12.5%).
Gross margin -50 bps to 36.8% Narrowed price-cost gap and tariff refund offset by persistent inflation, unfavorable mix, and a $4.2M LIFO charge.
Americas Welding Sales +11% / EBIT +15% 7% volume, ~4% price; adjusted EBIT margin +110 bps to 19.7% on broad-based demand, equipment up low-double-digit volume.
International Welding Sales +4.5% / EBIT -13% Alloy Steel, price, and FX offset by ~5% volume decline on weak EMEA; margin -210 bps to 10.6%.
Harris Products Group Sales +27% / EBIT +33% 34% higher price on elevated silver/copper (moderating sequentially); margin +100 bps to 20.4% on SG&A leverage and a tariff refund.
Operating cash flow Record $254M (138% conversion) Strong earnings and a 100 bps working-capital improvement; 95% year-to-date conversion, on track for 100%.

Earnings Call Themes & Trends

TopicPrevious mentionCurrent periodTrend
Americas industrial recoveryNine quarters of volume compressionA clear volume inflection with six consecutive months of favorable Americas macro data, strong incoming orders, and a record backlog, giving management confidence in a durable industrial recovery led by capital-spending confidence in equipment and automation.—
Automation demand & backlogHigh backlogAutomation sales reached $229 million with broad-based strengthening (four of five segments), record backlog, and rising quoting activity, including accelerating automotive engagement for 2027+ lightweight-vehicle platforms; ~80% of automation is Americas.—
Price-cost & inflation managementNeutral price-cost for the full yearQ2 ended at -10 bps (better than expected); management now targets neutral price-cost in the second half via executed pricing, while monitoring persistent inflation in energy, logistics, and metals plus a raised $10M LIFO headwind.—
End-market breadthMixed demandFour of five end markets grew (~80% of revenue): general fabrication +30%+, energy/oil-and-gas ~+30% in Americas, heavy industries and non-residential structural steel up mid-single digits, and narrowing transportation declines expected to improve in the second half.—
Europe / International weaknessSoft EMEAInternational Welding volumes fell ~5% on weak European industrial activity and a Q1 buy-ahead pull-forward, with full-year segment margin guided to 10%-11% as EMEA and operating efficiency stay challenged.—
Middle East conflict$8-$10M/quarter headwind expectedActual Q2 impact was only $2-$3M during the ceasefire; management now expects a $6-$7M/quarter headwind as fighting resumes, with the local team actively supporting project restarts and exports.—
Harris Products Group dynamicsElevated metal-cost pricingSales up 27% on 34% higher price (silver/copper moderating sequentially) but volumes challenged by HVAC comps and a prior-year retail load-in; margins (20.4%, aided by a tariff refund) expected to normalize to 18-19% in the second half.—
RISE 2030 strategyEnterprise initiatives underwayA range of factory-productivity, SG&A-efficiency, and commercial-effectiveness initiatives, expected to add 100-125 bps of margin improvement in a steady progression over the five years through 2030.—

Q&A Summary

Oliver (for Angel Castillo, Morgan Stanley) asked whether the price-cost assumption changed to second-half neutral and about automation project mix in July.
Gabe Bruno confirmed the change to price-cost neutral for the back half (Q2 ended at -10 bps, better than expected); Steve Hedlund said automation demand is broadly strengthening across four of five segments, especially general industries (pre-engineered cells, cobots), with encouraging capital-investment willingness and favorable mix ahead.
Mig Dobre (Baird) asked to quantify the tariff refund and LIFO flow, and for detail on the Middle East headwind and what is happening in the region.
Hedlund said the tariff impact was mostly Section 232 (not IEEPA), already baked into pricing/price-cost neutrality, with the only explicit call-out being Harris's ~100 bps EBIT benefit (not expected to sustain the 20% level); Bruno framed LIFO as a $10M full-year headwind, and said the Middle East impact was reduced to $6-$7M/quarter (from $8-$10M) after a favorable $2-$3M Q2.
Jay Gamora (for Steve Barger, KeyBanc) asked what is behind general fabrication's mid-30% growth and the expected run rate, plus which RISE initiatives are the biggest self-help margin contributors.
Bruno and Hedlund credited accelerating standard-equipment momentum (from April through July), rising capital-investment confidence, record automation backlog, and steady-to-improving consumable volumes as production creeps up; on RISE, Hedlund declined to single out one initiative across factory productivity, SG&A, and commercial effectiveness, with Bruno reiterating 100-125 bps of margin improvement in steady progression through 2030.
Adam Farley (for Nathan Jones, Stifel) asked about automation expectations in transportation and the drivers in Asia Pacific.
Bruno cited significant broad-based quoting activity and accelerating automotive engagement pointing to more favorable 2027+ orders, with automation on a high-single- to low-double-digit year-over-year trajectory; on APAC, he pointed to strength in India, China, and pockets of Southeast Asia, remaining bullish on Asia while core Europe stays challenged.

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Q2 2026 call
Reported 2026-07-30 · figures from the Lincoln Electric Holdings Inc Q2 2026 earnings call.

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