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Lincoln Electric Holdings (LECO)
NASDAQ:LECO
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Lincoln Electric Holdings
(NASDAQ:LECO)
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Rating:72Outperform
Price Target:
$329.00
▲(15.37% Upside)
Action:ReiteratedDate:02/14/26
LECO scores well on fundamental strength and a strong technical uptrend, supported by generally positive guidance and credible long-term targets. The main offsets are valuation (high P/E with a modest yield) and execution risk from leverage and near-term cash-flow/volume and margin pressures highlighted on the earnings call.
Positive Factors
Strong cash generation
Sustained high operating and free cash flow provides durable internal funding for R&D, automation investments, dividends, and buybacks. Strong cash conversion (FCF ~81% of net income) supports multi-year capital allocation plans and reduces reliance on external financing during cycles.
High margins and earnings quality
Elevated gross and net margins reflect pricing power and a profitable product mix (consumables, equipment, services). Durable margin structure underpins long-term ROE and cash returns, enabling reinvestment and shareholder distributions even through moderate volume cycles.
Strategic RISE targets & automation backlog
A clear multi-year RISE strategy with specific revenue, margin, and cash goals aligns capital allocation and execution priorities. Encouraging automation orders/backlog suggest durable demand for higher-margin automation solutions, which can drive sustainable revenue and margin expansion over years.
Negative Factors
Elevated leverage
Debt near parity with equity limits financial flexibility for large M&A, downside protection, or counter-cyclical investment. In a prolonged industrial slowdown higher leverage raises refinancing and interest rate sensitivity, constraining the firm's ability to fund opportunistic growth.
Volume and automation declines
Persistent volume weakness, notably in automation, reduces high-margin equipment sales and strains fixed-cost absorption. If automation recovery delays, the company may face prolonged margin pressure and slower realization of RISE targets tied to automation-led volume growth.
Working-cap and near-term cost pressures
Rising working-capital intensity and incentive cost step-ups compress free cash flow and limit reinvestment capacity near-term. Structural increases in inventory or receivables could persist through demand cycles, creating recurring cash conversion volatility that hampers consistent FCF growth.
Lincoln Electric Holdings (LECO) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$15.68B
Dividend Yield1.22%
Average Volume (3M)411.96K
Price to Earnings (P/E)30.6
Beta (1Y)1.06
Revenue Growth3.27%
EPS Growth10.89%
CountryUS
Employees12,000
SectorIndustrials
Sector Strength72
IndustryManufacturing - Tools & Accessories
Share Statistics
EPS (TTM)2.65
Shares Outstanding55,026,176
10 Day Avg. Volume369,880
30 Day Avg. Volume411,965
Financial Highlights & Ratios
PEG Ratio1.81
Price to Book (P/B)9.03
Price to Sales (P/S)3.14
P/FCF Ratio24.86
Enterprise Value/Market Cap1.07
Enterprise Value/Revenue3.96
Enterprise Value/Gross Profit10.92
Enterprise Value/Ebitda20.60
Forecast
1Y Price Target
$304.83Price Target Upside6.90% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering8
EPS Forecast (FY)10.85
Revenue Forecast (FY)$4.53B
Lincoln Electric Holdings Business Overview & Revenue Model
Company DescriptionLincoln Electric Holdings, Inc., through its subsidiaries, designs, develops, manufactures, and sells welding, cutting, and brazing products worldwide. The company operates through three segments: Americas Welding, International Welding, and The Harris Products Group. It offers welding products, including arc welding power sources, plasma cutters, wire feeding systems, robotic welding packages, integrated automation systems, fume extraction equipment, consumable electrodes, fluxes and welding accessories, and specialty welding consumables and fabrication products. The company's product offering also includes computer numeric controlled plasma and oxy-fuel cutting systems, and regulators and torches used in oxy-fuel welding, cutting, and brazing; and consumables used in the brazing and soldering alloys market. In addition, it is involved in the retail business in the United States. Further, the company manufactures copper and aluminum headers, distributor assemblies, and manifolds for the heating, ventilation, and air conditioning sector in the United States and Mexico. The company serves general fabrication, energy and process, automotive and transportation, and construction and infrastructure industries, as well as heavy fabrication, ship building, and maintenance and repair markets. It sells its products directly to users of welding products, as well as through industrial distributors, retailers, and agents. The company was founded in 1895 and is headquartered in Cleveland, Ohio.
How the Company Makes MoneyLincoln Electric generates revenue through several key streams, primarily by selling welding and cutting equipment, consumables, and related services. The company operates in multiple geographical regions, with significant sales in North America, Europe, and Asia, capitalizing on the growing demand for welding solutions in various industries. A substantial portion of its revenue comes from the sale of welding consumables, which includes electrodes and wires used in welding processes. Additionally, Lincoln Electric earns income through the sale of automated welding systems and robotic solutions, catering to manufacturers seeking to enhance productivity and efficiency. The company also provides training, technical support, and maintenance services, creating long-term relationships with customers. Strategic partnerships with industrial manufacturers and distributors enhance its market reach and contribute to its earnings by expanding product availability and customer access.
Lincoln Electric Holdings Earnings Call Summary
Earnings Call Date:Feb 12, 2026
(Q4-2025)
| % Change Since: |
Next Earnings Date:Apr 23, 2026
Earnings Call Sentiment Positive
The call presented a broadly positive outlook: management reported record full-year sales and adjusted EPS, strong cash generation and shareholder returns, permanent savings, top-quartile ROIC, and detailed an ambitious RISE strategy with clear 2030 targets. However, notable near-term challenges remain — volume declines (especially in automation and some international markets), gross margin compression in Q4, higher adjusted tax rate, elevated working capital, Q1 incentive cost pressure, and metal-price volatility. Management expects volume recovery to begin in the second quarter of 2026 and has confidence in automation orders/backlog and enterprise initiatives to drive margin expansion over the strategy period. On balance, the positive results, strong cash and capital return profile, and credible multi-year targets outweigh the current operational headwinds and cyclical softness.Q4-2025 Updates
Positive Updates
Record Full-Year Results
2025 sales increased 6% to a record $4,200,000,000 (driven by acquisitions and price). Adjusted EPS rose to a record $9.87 and adjusted operating income margin was sustained at prior-year record levels.
Fourth Quarter Revenue Growth
Q4 sales rose 5.5% to $1,079,000,000 driven by 8.9% higher price, 1.9% favorable FX, and 1.1% benefit from acquisitions, partially offset by a 6.4% volume decline.
Strong Cash Flow and Capital Returns
Generated strong operating cash flows in 2025, returned $94,000,000 to shareholders in the quarter, invested $44,000,000 in growth capex during the quarter, and reported an adjusted ROIC of 21.3%.
Permanent Savings and Cost Management
Savings programs generated an incremental $31,000,000 of permanent savings in 2025 and disciplined cost management helped finish the year at a neutral price-cost target.
Segment Profitability Gains — Americas Welding & Harris
Americas Welding adjusted EBIT increased 7% to $141,000,000 with adjusted EBIT margin up 90 bps to 20%. Harris Products Group adjusted EBIT increased 8% to $23,000,000 despite volume pressure; Harris pricing rose 18% in Q4.
Encouraging Automation Order/Backlog Trends
Despite 2025 declines, automation had strong order rates and a solid backlog in Q4; management expects automation revenue to begin ramping in 2Q 2026 and projects potential mid-single-digit growth in automation.
Ambitious 2030 RISE Targets
Management introduced RISE strategy: target sales above $6,000,000,000 by 2030, average operating income margin ~19% across cycle with a peak >20%, incremental operating income margin in the high-20% range, EPS mid-teens CAGR, and >$3.7B operating cash flow through 2030.
Balanced Capital Allocation Framework
Plan to maintain balanced allocation: ~30% of net income to dividends, ~$75,000,000 per year in buybacks to offset dilution, and continued growth investments with target CapEx $110–$130,000,000 in 2026.
Negative Updates
Volume Weakness and Automation Declines
Volume was a headwind: consolidated volumes declined 6.4% in Q4. Automation sales were $240,000,000 in Q4 (down 11% vs. prior year) and automation fell mid-single-digits for the full year at $870,000,000, pressuring equipment-related revenue.
Gross Margin Compression
Gross profit margin compressed 140 basis points in Q4 to 34.7% (gross profit dollars up ~1% to $374,000,000), reflecting lower volumes and a $3,000,000 LIFO charge.
Adjusted Operating Margin Slight Decline
Adjusted operating income margin declined 20 basis points in Q4 to 18% (adjusted operating income rose 4% to $194,000,000), indicating margin pressure despite cost actions.
Higher Effective Tax Rate (Adjusted)
Reported effective tax rate was 21.2% (including a $3,000,000 special item), and adjusted effective tax rate was 19.8%, approximately 300 basis points higher versus the prior year's adjusted rate due to mix and timing.
Regional Demand Challenges — Europe & Specific End Markets
International Welding volumes were down (~4% in the segment) and adjusted EBIT decreased ~4% to $31,000,000 with margin compression of 100 basis points to 11.8%, reflecting continued weakness in European industrial demand. Automotive and heavy industries were also challenged.
Harris Volume Pressure
Harris Products Group volumes compressed ~9% in Q4 due to weaker HVAC production activity despite 18% pricing; margin declined ~30 basis points.
Working Capital and Near-Term Cost Headwinds
Average operating working capital rose ~100 basis points to 17.9% (driven by higher inventory). Management expects a ~$10,000,000 sequential rise in incentive costs in Q1 that will pressure margins and cash flow early in 2026.
Metal Price Volatility Risk
Volatile metal prices (e.g., silver, copper) affect Harris brazing business; management excluded dynamic metal price adjustments from 2026 guidance, introducing earnings sensitivity if prices move materially.
Company Guidance
Lincoln’s 2026 guidance calls for mid‑single‑digit sales growth (organic split roughly 50/50 between volume and carryover 2025 price), with Q1 sales steady vs. Q4 and a pivot to volume‑led growth beginning in Q2 (typical 40/60 first‑half/second‑half seasonality); automation (Q4 $240M, FY2025 $870M, down mid‑single‑digits in 2025) is expected to recover to mid‑single‑digit growth and drive much of the volume improvement, price to be strongest in Q1 and largely anniversaryed in Q2 (Harris pricing excludes dynamic metal adders), and the company expects a mid‑20% incremental operating‑income margin from volume and enterprise initiatives in 2026 (ramping to high‑20s incrementals through 2030), an average operating‑income margin of ~19% across the cycle with a peak 20%+ target, sales above $6.0B and mid‑teens EPS CAGR to 2030, CapEx of $110–$130M, a Q1 incentive cost step‑up of ≈$10M, tax rate low‑to‑mid‑20%, interest $50–$55M, a working‑capital target of 16–17% of sales, >$3.7B cash from operations through 2030, and continued balanced capital allocation (≈30% of net income to dividends and about $75M/year in buybacks, with opportunistic additional repurchases).Lincoln Electric Holdings Financial Statement Overview
Summary
Fundamentals are solid: very strong TTM revenue growth and healthy profitability (about 36% gross margin and ~12% net margin), plus strong ROE. Offsetting factors are moderate-to-elevated leverage (debt roughly in line with equity) and weaker/volatile recent free-cash-flow growth and cash-flow coverage, which reduce consistency.Income Statement
TTM (Trailing-Twelve-Months) revenue is up sharply (+135.7%), and profitability remains solid with ~36% gross margin and ~12.3% net margin. Net income has improved versus 2024, supporting a healthy earnings profile. Offsetting this, operating profitability has shown some pressure versus prior periods (EBITDA margin ~18.4% in TTM vs ~20.0% in 2024), suggesting mix/cost headwinds despite the strong top-line growth.78
Positive
Balance Sheet
Leverage is moderate-to-elevated with debt roughly in line with equity (debt-to-equity ~0.98 in TTM, ~0.99 in 2024), which limits flexibility versus more conservatively financed peers. Positively, equity has grown and returns on equity are strong (TTM ~37%), indicating effective capital use. The main risk is that debt levels have risen over time, keeping balance-sheet risk from scoring higher.69
Positive
Cash Flow
Cash generation is solid: TTM operating cash flow (~$661M) and free cash flow (~$534M) are strong in absolute terms, and free cash flow is a healthy ~81% of net income, indicating good earnings quality. However, free cash flow growth is negative in TTM (-224.9%) and slightly down in 2024, pointing to volatility in conversion and/or higher investment needs. Operating cash flow coverage is also only moderate (TTM ~0.69), so cash flow strength is good but not consistently improving.72
Positive
| Breakdown | Dec 2025 | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 |
|---|---|---|---|---|---|
Income Statement | |||||
| Total Revenue | 4.23B | 4.01B | 4.19B | 3.76B | 3.23B |
| Gross Profit | 1.54B | 1.48B | 1.48B | 1.28B | 1.07B |
| EBITDA | 825.56M | 800.52M | 789.48M | 708.11M | 675.23M |
| Net Income | 520.53M | 466.11M | 545.25M | 472.22M | 276.58M |
Balance Sheet | |||||
| Total Assets | 3.78B | 3.52B | 3.38B | 3.18B | 2.59B |
| Cash, Cash Equivalents and Short-Term Investments | 308.79M | 377.26M | 393.79M | 197.15M | 192.96M |
| Total Debt | 1.29B | 1.32B | 1.16B | 1.25B | 819.00M |
| Total Liabilities | 2.31B | 2.19B | 2.07B | 2.15B | 1.73B |
| Stockholders Equity | 1.47B | 1.33B | 1.31B | 1.03B | 864.10M |
Cash Flow | |||||
| Free Cash Flow | 534.20M | 482.37M | 576.55M | 311.50M | 302.53M |
| Operating Cash Flow | 661.17M | 598.98M | 667.54M | 383.39M | 365.06M |
| Investing Cash Flow | -257.33M | -361.23M | -74.73M | -504.69M | -205.36M |
| Financing Cash Flow | -461.89M | -244.64M | -412.39M | 133.72M | -221.94M |
Lincoln Electric Holdings Technical Analysis
Positive
285.16
Price Trends
265.05
Positive
250.28
Positive
236.15
Positive
Market Momentum
6.15
Positive
58.43
Neutral
39.78
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For LECO, the sentiment is Positive. The current price of 285.16 is below the 20-day moving average (MA) of 286.09, above the 50-day MA of 265.05, and above the 200-day MA of 236.15, indicating a bullish trend. The MACD of 6.15 indicates Positive momentum. The RSI at 58.43 is Neutral, neither overbought nor oversold. The STOCH value of 39.78 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for LECO.
Lincoln Electric Holdings Risk Analysis
Lincoln Electric Holdings disclosed 18 risk factors in its most recent earnings report. Lincoln Electric Holdings reported the most risks in the "Legal & Regulatory" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Lincoln Electric Holdings Peers Comparison
UnderperformOutperform
Sector (63)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
79 Outperform | $18.07B | 66.50 | 8.66% | ― | 8.27% | 19.06% | |
78 Outperform | $20.09B | 20.17 | 17.96% | 2.52% | 0.24% | -1.85% | |
72 Outperform | $15.68B | 30.58 | 37.22% | 1.22% | 3.27% | 10.89% | |
72 Outperform | $7.62B | 26.67 | 9.60% | 1.61% | -1.01% | -12.13% | |
65 Neutral | $3.06B | 28.06 | 8.70% | 2.74% | -2.63% | -4.46% | |
63 Neutral | $10.79B | 15.43 | 7.44% | 2.01% | 2.89% | -14.66% | |
62 Neutral | $13.82B | 33.73 | 4.52% | 4.42% | -1.40% | ― |
* Industrials Sector Average
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Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
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.