What Management Said
Read the full Q4 2025 transcript ↗Welcome to Lincoln Electric's fourth quarter 2025 conference call, where we'll be covering our fourth quarter and full year 2025 financial results, as well as our new 2030 targets. Turning to Slide 3, I am proud to report record 2025 performance. Despite challenged end markets, our sales increased 6% to a record $4.2 billion from acquisitions and price. We maintained last year's record adjusted operating income margin, increased adjusted EPS to a record $9.87, and generated strong cash flows from operations.
These achievements, combined with solid commercial and operational execution, culminated in top-quartile ROIC and total shareholder return performance versus our peers. Turning to Slide 4 to cover demand trends in the fourth quarter. Organic sales grew 2.5% from price, which was largely offset by weaker volume performance. The growth reflects price contributions in consumable and equipment, as well as relatively steady volume performance in our welding consumables in Americas and International Welding.
2025 was a challenging year for automation due to lower capital spending and project deferrals. Automation sales were $240 million in the quarter, an 11% decline versus a record prior year. On a full year basis, we achieved $870 million, which is a mid-single-digit % decline. We are encouraged by strong order rates and a solid backlog in our automation business in the fourth quarter.
What went well
- Full-year 2025 sales increased 6% to a record $4.2 billion, and adjusted EPS rose to a record $9.87, with the company maintaining the prior year's record adjusted operating income margin.
- Fourth quarter sales increased 5.5% to $1,079 million, driven by 8.9% higher price, 1.9% favorable foreign exchange, and a 1.1% acquisition benefit.
- Excluding automation's challenging prior-year comparison, organic sales would have increased approximately 8% in the quarter, and three of five sectors grew with acceleration in December.
- Savings programs generated an incremental $31 million of permanent savings for the year, and the company finished at its neutral price-cost target while delivering top-quartile ROIC and total shareholder return.
- Americas Welding fourth quarter adjusted EBIT increased 7% to $141 million with EBIT margin up 90 basis points to 20% on effective cost management, favorable mix, and $5 million in permanent savings.
- The company unveiled its new RISE strategy with 2030 targets of sales above $6 billion, a 19% average operating income margin, a peak 20%+ margin, mid-teens EPS CAGR, and over $3.7 billion in cumulative cash flow from operations.
What went wrong
- Fourth quarter volumes declined 6.4%, magnified by the automation portfolio's challenging prior-year comparison, with automation sales down 11% to $240 million in the quarter and down mid-single digits to $870 million for the year.
- Gross profit margin compressed 140 basis points to 34.7% on lower volumes and a $3 million LIFO charge.
- Harris Products Group volumes compressed 9% on declining HVAC production, and its adjusted EBIT margin declined 30 basis points on lower volumes and mix.
- International Welding volumes fell 4% on continued European industrial weakness, and its adjusted EBIT decreased approximately 4% with margin down 100 basis points to 11.8%; the effective tax rate rose 510 basis points to 21.2%.
Guidance Changes
| Metric | Period | Current guidance |
|---|---|---|
| Full-year sales growth | FY2026 | Mid-single-digit % range, with organic split 50/50 between volume and 2025 price carryover (New) |
| Incremental operating income margin | FY2026 | Mid-20% from volume growth and enterprise initiatives, resulting in modest full-year margin improvement (New) |
| Capital expenditures | FY2026 | Target range of $110 million-$130 million (New) |
| Interest expense | FY2026 | $50-$55 million, generally in line with last year (Maintained) |
| 2030 sales target | FY2030 | Above $6 billion with high single-digit to low double-digit % growth framework (New) |
| 2030 operating margin | FY2030 | 19% average across cycle, peak 20%+, with high 20% incremental margins (New) |
Performance Breakdown
| Metric | YoY | Note |
|---|---|---|
| Q4 total sales | +5.5% to $1,079 million | 8.9% higher price, 1.9% favorable FX, and 1.1% from acquisitions, offset by 6.4% lower volumes |
| Q4 adjusted EPS | +3% to $2.65 | Operating income growth and a $0.07 share-repurchase benefit, partly offset by a higher effective tax rate |
| Americas Welding sales | +approximately 4% | 10.4% higher price and 60 bps favorable FX, offset by ~7% lower volumes from automation's tough comparison |
| International Welding sales | +approximately 7% | 5% Alloy Steel benefit, 5% favorable FX, and 50 bps price, offset by 4% lower volumes on European weakness |
| Harris Products Group sales | +11% | 18% higher price and 170 bps favorable FX, offset by 9% lower volumes on declining HVAC production |
| Automation sales | -11% to $240 million in Q4; -mid-single digits to $870 million for the year | Lower capital spending, project deferrals, and a record prior-year comparison |
Earnings Call Themes & Trends
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Industrial recovery signals | Encouraging order trends emerging | Acceleration in December, OEM higher capex plans, and PMI pivoting to growth in January suggest early stages of industrial recovery | Improving |
| Automation | Order rates accelerating in late Q3/October | Strong Q4 order rates and backlog expected to drive mid-single-digit growth in 2026, ramping from Q2 | Improving |
| Consumable volumes | Resilient/steady | Steady and resilient, awaiting inflection to consistent growth that typically precedes capital spending by 1-2 quarters | Stable |
| Strategy framework | Higher Standard strategy concluding | New RISE strategy launched with 2030 targets and center-led operating model transition | Evolving |
| European demand | Challenged | Still challenged; 2030 targets not predicated on a significant European recovery | Stable to cautious |
Q&A Summary
What is the timeline for achieving the high-20s incremental margins, and how do M&A and innovation factor in?
Enterprise initiative benefits should flow steadily over the five-year period rather than as a big bang, with finance furthest along followed by IT and HR; M&A is incorporated targeting mid-teens returns by year three without limiting growth.
What is the organic growth breakdown within the mid-single-digit sales guide and recent order trends?
Organic is split 50/50 between price and volume, with pricing concentrated in the first half before anniversarying in Q2 and volume growth pivoting up from Q2; confidence is anchored on automation order and backlog strength, while small-to-mid fabricators have not yet deployed capital.
What is the automation outlook for 2026 and the size of the Q4 order increase?
Automation was $870 million in 2025 (a mid-single-digit decline), and 2026 is expected to recover much of that softness at a mid-single-digit growth trajectory based on order levels and backlog, with confidence increasing as choppiness eases.
What benefits come from the center-led functions and does Asia/Middle East expansion require it?
Center-led, not centralized, aims to capture scale through standardized, simplified, automated processes while retaining local agility; it is largely business process redesign to enable shared services, process automation, and chatbots.
On Harris pricing, is metal inflation flowing through, and will a 2026 price increase be needed broadly?
Pricing actions are taken as conditions require to stay price-cost neutral; Harris has a mechanical adder for silver and copper that is not dilutive to its margin, though metal markets remain volatile and unpredictable.
Is there opportunity to drive higher automation margins and do accretive techquisitions?
Automation is currently dilutive but the first step is reaching non-dilutive before discussing how accretive it can become; differentiated technology like Inrotech that solves real customer pain points should command pricing and be accretive.
More on Lincoln Electric Holdings Inc
Reported 2026-02-12 · figures from the Lincoln Electric Holdings Inc Q4 2025 earnings call.
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