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ESAB Corporation (ESAB)
NYSE:ESAB
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ESAB Corporation
(NYSE:ESAB)
73Outperform
Positive Factors
Earnings and Financial Performance
ESAB outperformed expectations with EBITDA 5% ahead of consensus while revenue was 2% ahead, and raised the low end of outlook, bringing guidance up ~1% at the midpoint.
Market Position and Growth
ESAB is achieving impressive performance in a difficult operating environment, driven by outgrowth in the Americas and markets like India and the Middle East, where it holds a dominant position.
Operational Efficiency
The company exceeded expectations with its margin performance, achieving a 19.6% margin compared to the consensus of 19.3%.
Negative Factors
Comparison with Peers
ESAB remains at over a 2x discount to ITW and is in line with larger peer LECO which has de-rated in recent months.
Core Industry Challenges
ESAB is increasingly building a track record of superior execution in a challenging core welding demand environment.
Market Challenges
ESAB's strong demand in India, other parts of Asia, and the Middle East is offsetting softness in Europe.
ESAB Corporation (ESAB) vs. S&P 500 (SPY)
Market Cap
$7.01B
Dividend Yield0.26%
Average Volume (3M)380.67K
Price to Earnings (P/E)26.9
Beta (1Y)1.48
Revenue Growth-1.22%
EPS Growth28.46%
CountryUS
Employees8,000
SectorIndustrials
Sector Strength66
IndustryManufacturing - Metal Fabrication
Share Statistics
EPS (TTM)4.34
Shares Outstanding60,529,964
10 Day Avg. Volume357,427
30 Day Avg. Volume380,667
Financial Highlights & Ratios
PEG Ratio0.94
Price to Book (P/B)N/A
Price to Sales (P/S)2.63
Price to Cash Flow (P/CF)14.20
P/FCF Ratio17.60
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$134.20Price Target Upside15.85% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering6
ESAB Corporation Business Overview & Revenue Model
Company DescriptionESAB Corporation formulates, develops, manufactures, and supplies consumable products and equipment for use in cutting, joining, and automated welding, as well as gas control equipment. Its comprehensive range of welding consumables includes electrodes, cored and solid wires, and fluxes using a range of specialty and other materials; and cutting consumables, including electrodes, nozzles, shields, and tips. The company's fabrication technology equipment ranges from portable welding machines to large customized automated cutting and welding systems. It also offers a range of digital software and solutions to help its customers increase their productivity, remotely monitor their welding operations, and digitize their documentation. The company sells its products under the ESAB brand to various end markets, including general industry, construction, infrastructure, transportation, energy, renewable energy, and medical and life sciences. It offers its products through independent distributors and direct salespeople. ESAB Corporation was incorporated in 2021 and is based in Wilmington, Delaware.
How the Company Makes MoneyESAB Corporation generates revenue primarily through the sale of its welding and cutting equipment and consumables. The company's key revenue streams include the manufacturing and distribution of welding consumables such as electrodes, wires, and fluxes, as well as welding and cutting equipment like machines, torches, and accessories. ESAB also offers automation solutions that enhance productivity and efficiency for industrial clients. Significant partnerships with distributors and suppliers, as well as a strong global presence, contribute to ESAB's earnings by facilitating access to diverse markets and customer bases.
ESAB Corporation Financial Statement Overview
Summary
ESAB Corporation shows a consistent revenue growth trajectory with improved profitability margins and stable financial structure. The slight revenue decline and increased total debt are areas to watch, but overall, strong financial health is demonstrated.Income Statement
ESAB Corporation shows a consistent revenue growth trajectory over the years, with a moderate gross profit margin averaging around 37.8% for 2024. The net profit margin has improved, reaching 9.67% in 2024, indicating effective cost management and profitability enhancement. The EBIT and EBITDA margins are strong at approximately 16.3% for 2024, highlighting operational efficiency. However, the slight decline in revenue from 2023 to 2024 suggests potential market challenges.83
Very Positive
Balance Sheet
The company's balance sheet reflects a stable financial position with a debt-to-equity ratio of 0.61 in 2024, showcasing a balanced leverage. The equity ratio is healthy at approximately 43.8%, indicating robust asset backing by equity. Return on Equity (ROE) improved to 14.97%, which signifies effective use of equity to generate profits. Nonetheless, the increase in total debt over the years suggests a cautious approach to leverage is needed to maintain financial stability.75
Positive
Cash Flow
ESAB's cash flow is strong with a positive free cash flow trajectory, growing by 7.55% from 2023 to 2024. The operating cash flow to net income ratio is 1.34, indicating efficient cash generation relative to reported profits. The free cash flow to net income ratio of 1.15 further underscores the company's capability to generate cash beyond its net earnings. However, fluctuations in investing cash flow warrant attention to maintain liquidity and investment efficiency.78
Positive
| Breakdown | |||||
| TTM | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|---|
| Income Statement | Total Revenue | ||||
| 2.78B | 2.74B | 2.77B | 2.59B | 2.43B | 1.95B | Gross Profit |
| 1.00B | 1.04B | 1.02B | 885.53M | 837.98M | 682.47M | EBIT |
| 432.45M | 447.45M | 404.17M | 329.06M | 306.21M | 202.13M | EBITDA |
| 478.68M | 502.08M | 465.14M | 418.14M | 393.69M | 299.25M | Net Income Common Stockholders |
| 233.33M | 264.84M | 203.73M | 223.75M | 235.11M | 157.41M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | ||||
| 249.36M | 249.36M | 102.00M | 72.02M | 41.21M | 49.21M | Total Assets |
| 4.03B | 4.03B | 3.83B | 3.75B | 3.46B | 3.39B | Total Debt |
| 1.16B | 1.16B | 1.12B | 1.24B | 109.24M | 97.04M | Net Debt |
| 913.88M | 913.88M | 1.02B | 1.17B | 68.03M | 47.83M | Total Liabilities |
| 2.23B | 2.23B | 2.18B | 2.37B | 959.53M | 841.06M | Stockholders Equity |
| 1.77B | 1.77B | 1.61B | 1.35B | 2.46B | 2.50B |
| Cash Flow | Free Cash Flow | ||||
| 289.01M | 303.62M | 282.32M | 174.12M | 215.15M | 269.04M | Operating Cash Flow |
| 336.89M | 355.40M | 330.49M | 214.36M | 250.74M | 309.18M | Investing Cash Flow |
| -63.11M | -205.70M | -62.24M | -184.42M | -35.27M | -34.57M | Financing Cash Flow |
| -246.59M | 31.67M | -219.72M | 7.56M | -221.57M | -326.42M |
ESAB Corporation Technical Analysis
Negative
115.84
Price Trends
122.55
Negative
123.83
Negative
112.39
Positive
Market Momentum
-0.90
Positive
41.14
Neutral
33.66
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For ESAB, the sentiment is Negative. The current price of 115.84 is below the 20-day moving average (MA) of 120.53, below the 50-day MA of 122.55, and above the 200-day MA of 112.39, indicating a neutral trend. The MACD of -0.90 indicates Positive momentum. The RSI at 41.14 is Neutral, neither overbought nor oversold. The STOCH value of 33.66 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for ESAB.
ESAB Corporation Risk Analysis
ESAB Corporation disclosed 36 risk factors in its most recent earnings report. ESAB Corporation reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
ESAB Corporation Peers Comparison
Overall Rating
UnderperformOutperform
Sector (62)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
77 Outperform | $23.94B | 8.98 | 24.30% | 1.18% | -2.99% | 159.26% | |
74 Outperform | $72.30B | 21.04 | 110.24% | 2.35% | -1.30% | 20.26% | |
73 Outperform | $7.01B | 26.86 | 16.99% | 0.26% | -1.22% | 28.46% | |
71 Outperform | $10.66B | 23.35 | 35.36% | 1.51% | -4.23% | -13.42% | |
65 Neutral | $315.08M | 5.69 | 8.98% | ― | -2.24% | 42.13% | |
62 Neutral | $8.06B | 13.61 | 3.91% | 3.11% | 3.80% | -14.06% | |
61 Neutral | $487.56M | 53.65 | 1.07% | 1.64% | -2.02% | -80.76% |
* Industrials Sector Average
Performance Comparison
ESAB
ESAB Corporation
115.84
5.56
5.04%
CMCO
Columbus Mckinnon
17.04
-25.73
-60.16%
DOV
Dover
174.65
1.00
0.58%
ITW
Illinois Tool Works
246.46
-14.16
-5.43%
LECO
Lincoln Electric Holdings
190.29
-59.47
-23.81%
MTW
Manitowoc Company
8.89
-5.08
-36.36%
ESAB Corporation Earnings Call Summary
Earnings Call Date: Feb 20, 2025 | % Change Since: -7.42% | Next Earnings Date: Apr 30, 2025
Earnings Call Sentiment Positive
ESAB reported a solid performance with record profits and strong cash flow, driven by strategic acquisitions and innovation. Despite challenges such as flat organic growth and FX headwinds, the company showed resilience and positive future outlook. The highlights, including record EBITDA margins and strategic acquisitions, outshine the lowlights.Highlights
Record Fourth Quarter Profits
ESAB achieved record fourth quarter adjusted EBITDA margin of 20.3%, with a 90 basis points year-over-year improvement, driven by successful implementation of EBX initiatives.
Strong Free Cash Flow and Debt Reduction
Achieved record free cash flow of $321 million with a conversion rate exceeding 100%, supported by EBX business system and AI projects. Net leverage ended under 1.6x after spending $154 million on acquisitions.
Acquisition Strategy and Expansion
Added three bolt-on acquisitions in 2024, with a first deal of 2025 signed with Bavaria. These acquisitions are EPS accretive in year one and support the compounder strategy.
Innovation and Product Launches
Launched over 100 new products in 2024 and invested over $100 million in growth initiatives, including AI enhancements and commercial excellence programs.
Regional Performance and Market Share Gains
Strong performance in Europe, Middle East, and Asia, with total sales increase of 300 basis points and EBITDA margins at 19.3%. Notable share gains in equipment and improved product mix.
Lowlights
Flat Organic Growth
Total sales reflected flat organic growth with some regions experiencing muted volumes, particularly in developed markets such as North America and Europe.
FX Headwinds Impacting Revenue
Experienced a 500 basis points FX headwind due to a strong U.S. dollar, affecting overall revenue performance.
Americas Organic Sales Decline
Organic sales in the Americas declined by 200 basis points, although offset by strong price performance and acquisitions.
Company Guidance
During the ESAB's fourth quarter 2024 conference call, several key metrics were highlighted reflecting the company's strong performance and future outlook. The company achieved a record fourth quarter adjusted EBITDA margin of 20.3% with a 90 basis point expansion on flat organic growth. Over the year, the adjusted EBITDA margin set a new record at 19.7%, and the company recorded over 100% free cash flow conversion, achieving $321 million in free cash flow. For 2025, ESAB anticipates organic growth in the range of 0% to 2% and a projected adjusted EBITDA between $515 million and $530 million, reflecting a margin increase of approximately 70 basis points at the midpoint. The company expects to generate $60 million in savings by 2028 through various initiatives, including the EBX business system, while projecting a $25 million savings in 2025 from productivity and restructuring efforts. Additionally, ESAB's guidance includes a 3.5% FX headwind and plans for further growth through bolt-on acquisitions, with a robust acquisition funnel set to propel the company towards its 2028 goals.Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.