Earnings call transcript: Lincoln Electric Q2 2025 beats expectations, stock rises

Lincoln Electric Holdings Inc. (NASDAQ:LINC) reported strong financial results for the second quarter of 2025, exceeding Wall Street expectations. The company posted an adjusted earnings per share (EPS) of $2.60, surpassing the forecast of $2.31 by 12.55%. Revenue reached $1.09 billion, also beating the anticipated $1.04 billion. Following the announcement, Lincoln Electric’s stock surged 8.66% to $230.03 in pre-market trading. According to InvestingPro data, the company maintains impressive financial health with a score of 4.17 out of 5 for profitability and has consistently raised its dividend for 28 consecutive years.

Key Takeaways

• Lincoln Electric’s Q2 2025 EPS and revenue both exceeded forecasts.
• The company’s stock price rose significantly in pre-market trading.
• Strong performance attributed to growth in general industries, HVAC, and consumables.

Company Performance

Lincoln Electric demonstrated robust performance in Q2 2025, with sales increasing by 6.6% year-over-year to $1.09 billion. The company’s gross profit rose by approximately 6% to $406 million. This growth was driven by increased demand in general industries, HVAC, and consumables, despite challenges in the construction infrastructure sector.

Financial Highlights

• Revenue: $1.09 billion, up 6.6% year-over-year
• Adjusted EPS: $2.60, up 11% from the previous year
• Gross Profit: $406 million, an increase of 6%
• Cash Conversion Ratio: 104%
• Adjusted Return on Invested Capital: 21.7%

Earnings vs. Forecast

Lincoln Electric’s Q2 2025 earnings exceeded expectations, with an EPS of $2.60 compared to the forecasted $2.31, representing a 12.55% surprise. The company’s revenue also surpassed estimates, reaching $1.09 billion against the projected $1.04 billion, marking a 4.81% surprise.

Market Reaction

Following the earnings announcement, Lincoln Electric’s stock rose by 8.66% in pre-market trading, reaching $230.03. This increase reflects investor confidence in the company’s ability to outperform expectations despite prevailing economic uncertainties. The stock’s current price is approaching its 52-week high of $244.3, indicating strong market sentiment. Based on InvestingPro analysis, the stock appears to be trading above its Fair Value, with a P/E ratio of 29.88x and a price-to-book ratio of 10.06x. Investors seeking detailed valuation insights can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.

Outlook & Guidance

Looking ahead, Lincoln Electric anticipates low single-digit organic sales growth for the remainder of 2025. The company expects acquisitions to contribute approximately 270 basis points to sales growth. Additionally, the automation business is projected to remain steady in the second half of the year. InvestingPro data reveals that three analysts have recently revised their earnings upward for the upcoming period, with the company maintaining strong financial metrics including a current ratio of 1.78 and an Altman Z-Score of 7.84, indicating robust financial stability.

Executive Commentary

CEO Steve Hedland praised the company’s management of inflationary pressures and supply chain complexities, stating, "Our team has done an excellent job managing inflationary headwinds and navigating supply chain complexities." He also expressed excitement about the acquisition of Alloy Steel, which is expected to contribute $20-$25 million in sales for the rest of 2025.

Risks and Challenges

• Trade Policy Uncertainty: Ongoing uncertainties around trade policies could impact capital investments.
• Supply Chain Disruptions: Potential disruptions may affect production and delivery timelines.
• Inflationary Pressures: Rising costs could pressure margins if not managed effectively.

Q&A

During the earnings call, analysts inquired about the impact of trade policy uncertainty on customer investments. The company noted strong quoting activity in automation but highlighted that customers remain cautious. Additionally, questions were raised about July order trends, which Lincoln Electric reported as stable.

Overall, Lincoln Electric’s strong Q2 performance and positive market reaction underscore its resilience and strategic positioning in an evolving economic landscape.

Full transcript - Lincoln Electric Holdings Inc (LECO) Q2 2025:

Conference Operator: Ladies welcome to the Lincoln Electric twenty twenty five Second Quarter Financial Results Conference Call. All lines have been placed on mute and this call is being recorded. It is my pleasure to introduce your host, Amanda Butler, Vice President of Investor Relations and Communications. Thank you. You may begin.

Amanda Butler, Vice President of Investor Relations and Communications, Lincoln Electric: Thank you, Tamika, and good morning, everyone. Welcome to Lincoln Electric’s second quarter twenty twenty five conference call. We released our financial results earlier today, and you can find our release and this call’s slide presentation at lincolnelectric.com in the Investor Relations section. Joining me on the call today is Steve Hedland, Chair, President and Chief Executive Officer and Gabe Bruno, our Chief Financial Officer. Following our prepared remarks, we’re happy to take your questions.

But before we start our discussion, please note that certain statements made during this call may be forward looking and actual results may differ materially from our expectations due to a number of risk factors and uncertainties, which are provided in our press release and in our SEC filings on Forms 10 ks and 10 Q. In addition, we do discuss financial measures that do not conform to U. S. GAAP, and a reconciliation of non GAAP measures to the most comparable GAAP measure is found in the financial tables in our earnings release, which again is available in the Investor Relations section of our website at lincolnelectric.com. And with that, I’ll turn the call over to Steve Hedlinton.

Steve?

Steve Hedland, Chair, President and Chief Executive Officer, Lincoln Electric: Thank you, Amanda. Good morning, everyone. Turning to slide three, I am pleased to report strong second quarter results. Our 7% sales growth reflected diligent price management, benefits from our m and a strategy, and improved volume performance from the Americas Welding and Harris Products Group segments. Our team has done an excellent job managing inflationary headwinds and navigating supply chain complexities while maintaining our neutral price cost position.

These efforts combined with $11,000,000 from savings actions and stronger operating leverage from SG and A has delivered strong profit performance. These results demonstrate the long term value creation we are generating from our higher standard strategy initiatives and how we are shaping the business to outperform in the next growth cycle. I would like to recognize and thank the global Lincoln Electric team for their ongoing hard work and commitment to serving our customers and advancing the business towards our targets. Our earnings expanded in the quarter with adjusted earnings per share up 11% to $2.6 Year to date cash flow generation has been strong with 100 plus percent cash conversion of free cash flow. We have maintained top quartile ROIC performance, which reinforces our disciplined and balanced capital allocation strategy of investing in growth through the cycle and returning excess cash to shareholders.

And as we highlighted in our earnings release, we are pleased to announce that tomorrow we expect to close our acquisition of the remaining 65% interest in Alloy Steel. We are excited to bring the Alloy Steel team aboard and work together to scale their proprietary wear plate solutions into new geographies and end markets. We’ve had a chance to work with them for a few months, they are a great addition with a strong business that will be accretive to margins and earnings on day one. Turning to slide four to discuss organic sales performance. We achieved an approximate 3% increase in organic sales in the quarter led by pricing actions taken to mitigate higher input costs.

Volume declines narrowed to 2.3 as North American manufacturing activity and the industrial gas distribution channel in America’s welding remained more resilient than expected. In addition, the Harris Products Group generated 11% higher volumes primarily from the rollout of product to support a new national US retail partner as well as ongoing strength in HVAC due in part to data center build outs. We continue to see customers defer capital spending and maintain a wait and see approach due to policy uncertainty, which continues to impact our equipment and automation portfolios. Our automation sales have stabilized around $215,000,000 per quarter, which we expect to continue in the third quarter and possibly through year end. We are encouraged by automation’s steady order rates and backlog quarter over quarter, and quoting activity remains elevated across their end markets.

Year to date automotive and energy sector projects are growing, and we saw general industries pivot to growth in the second quarter. Looking at end market organic sales trends, three of five end markets grew in the quarter. This was largely price driven, but we achieved volume growth across general industries, incorporates HVAC and in consumables supporting domestic manufacturing activity. Energy also grew led by domestic and international power generation projects and strong pipe activity in America’s welding. Heavy industries remains challenged, but it is incrementally improving on easier prior year comparisons.

And as agricultural machinery OEMs continue to destock, it sets up for a recovery in production in 2026. Construction infrastructure is generally choppy given the timing of project activity, but looking at the first half of the year, which smooths out project timing, organic sales were relatively steady. And finally, automotive transportation volumes were compressed due to slower production levels while equipment investments did expand. I am pleased by the progression of the business year to date and would like to underscore our team’s continued focus on serving customers, investing in growth, and driving productivity and operational efficiency throughout the organization. We also remain disciplined on price cost management and are continuing to shape the operating model to position the business for more profitable growth as end markets recover.

And I will now pass the call to Gabe Bruno to cover second quarter financials and our raised outlook in more detail.

Gabe Bruno, Chief Financial Officer, Lincoln Electric: Thank you, Steve. Moving to slide five. Our second quarter sales increased 6.6% to $1,089,000,000 from 5.2% higher price, a 3% benefit from acquisitions, and 70 basis points from favorable foreign exchange translation. These increases were partially offset by 2.3% lower volumes. Gross profit dollars increased approximately 6% to $406,000,000, and gross profit margin held relatively steady at 37.3%, down 30 basis points versus prior year.

A $3,000,000 benefit from our savings actions as well as diligent cost management and operational initiatives substantially offset the impact of lower volumes and $8,500,000 LIFO charge in the quarter and acquisitions. Year to date, we have incurred approximately $10,000,000 in LIFO charges, which is expected to repeat in the second half of the year. Our SG and A expense increased approximately 1% or $2,000,000 primarily from acquisitions. $8,000,000 from our savings actions offset an incremental $4,000,000 of employee costs, reflecting our decision to reinstate the annual compensation merit increase in the quarter, which adds approximately $5,000,000 per quarter. SG and A as a percent of sales improved 100 basis points to 19.4% of sales.

Reported operating income increased 29%. The year over year increase reflects special item charges in the prior year period. Excluding special items, adjusted operating income increased approximately 10% to $195,000,000 Our adjusted operating income margin increased 50 basis points to 17.9%, reflecting a 26% incremental margin. Acquisitions had a 30 basis point unfavorable impact to our margin. Other income, excluding special items, was 19% higher from our initial alloy steel investment.

We reported second quarter diluted earnings per share of $2.56. On adjusted basis, EPS increased 11% to $2.60. Our EPS results include 3¢ from favorable foreign exchange translation and 6¢ from the impact of share repurchases. Moving to our reportable segments on slide six. Americas Welding sales increased approximately 7% driven by 6.5% higher price and an approximate 5% contribution from our Vanair acquisition, which anniversaries August 1.

Volumes were lower by approximately 3%. Higher price reflects actions taken through the first half of the year to address rising input costs. We anticipate higher price in the third quarter due to the timing of our actions throughout the second quarter, and we will continue to monitor trade policy and decisions and take appropriate actions as needed. Americas Welding segment’s second quarter adjusted EBIT increased 1% to $138,000,000 The adjusted EBIT margin declined 130 basis points to 18.6% primarily due to higher incentive compensation and the impact from the acquisition and higher allocation of corporate expenses, which anniversaries in the third quarter. These factors offset the benefits of cost management and our savings actions.

We expect Americas Welding to continue to operate in the 18% to 19% EBIT margin range for the remainder of the year. Moving to Slide seven, the International Welding segment sales declined 2.5% as approximately 4% favorable foreign exchange translation was partially offset by 7% lower volumes. Demand trends further weakened in the EMEA region largely outside of core Europe, and Asia Pacific was challenged with stronger prior year project activity. Adjusted EBIT increased approximately 19% to $31,000,000. Margin increased 230 basis points to a more normalized rate of 12.7%, which reflects seasonality, benefits from savings actions, and equity earnings from our alloy steel investment.

We expect International Welding’s margin performance to operate on the higher end of their 11 to 12% margin range for the balance of the year, reflecting the inclusion of alloy steel. Moving to the Harris Products Group on slide eight. Second quarter sales increased 19% with 11% higher volumes and 7% higher price. Volumes reflected strength from the HVAC sector and expansion of our brand in the retail channel requiring initial inventory stocking. Underlying retail trends remained challenged in the quarter.

Price increased on metal costs and price actions taken to mitigate rising input costs. Adjusted EBIT increased approximately 28% to $32,000,000 and margin improved 100 basis points to a record 19.4% on volume growth, effective cost management, and strategic initiatives. We expect the Harris segment to operate in the 17 to 18% margin range for the balance of the year due to seasonality and normalized volume trends. Moving to slide nine. We continue to generate strong cash flows from operations in the quarter.

For the first half, cash flows have increased approximately 9% with a 104% conversion ratio. Average operating working capital rose 40 basis points to 18.4% versus the comparable prior year period. Moving to slide 10. We’re executing well to our capital allocation plan. We invested $57,000,000 in growth reflecting CapEx investments in our initial investment in alloy steel.

We also returned $169,000,000 to shareholders through our higher dividend payout rate and the $127,000,000 of share repurchases. We maintained a solid adjusted return on invested capital of 21.7%. Moving to slide 11 to discuss our operating assumptions for 2025. We are raising our operating framework assumptions given first half actuals and the inclusion of alloy steel. Year to date, we have seen volumes only partially offset price increases, and our updated operating assumptions assume this dynamic will continue through the balance of the year given the relative resilience in North America.

We expect this will result in a low single digit percent organic sales growth for the full year. With the announced agreement to acquire the remaining interest in Alloy Steel on August 1, we now expect acquisitions to generate approximately 270 basis points in sales growth this year with alloy steel contributing 20 to $25,000,000 in sales for the balance of the year. We are continuing to target a neutral price cost position. Our supply chain initiatives are focused on maximizing domestic supply, and we are pursuing benefits from operational initiatives and savings actions to help offset inflation in addition to price actions. Our savings program anniversaried in July.

In the first four quarters of the program, we generated $47,000,000 in incremental savings with approximately 65% from temporary cost savings actions. As we look ahead to the balance of the year, we estimate an additional 10 to $15,000,000 will be realized largely from permanent structural savings now that we have anniversaried our temporary cost savings actions. These permanent savings will be split evenly between our two welding segments. The savings mix shift reflects the reintroduction of some discretionary spending into the business to support our commercial teams and strategic initiatives, which have been margin neutral as demonstrated in the second quarter. By year end, we expect to achieve approximately $60,000,000 in savings from the June program at a fifty fifty temporary and permanent split, and we continue to assess where we can further shape the operating model.

With more favorable volume performance in the first half of the year and the inclusion of alloy steel, we now expect our full year adjusted operating income margin to be steady to slightly up versus the prior year period with a high teens percent incremental margin. This builds on our first half incremental margin rate of 17%. Our interest expense, tax, and CapEx assumptions are being maintained, but we are now including 7¢ of EPS contribution from the alloy steel acquisition for the balance of the year. We believe these updated operating assumptions reflect the progression of the business while remaining cautious on demand trends in the near term. And now I would like to turn the call over for questions.

Conference Operator: Your first question is from the line of Andrew Costello with Morgan Stanley.

Andrew Costello, Analyst, Morgan Stanley: Hi, good morning. Thanks for taking my question. I was hoping you could help unpack a little bit more what you’re seeing in terms of orders and just kind of customer demand. In particular, if you could talk about maybe what you’re seeing in terms of trends in July and how that kind of progressed from 2Q into July and how that’s kind of informing your your second half outlook?

Gabe Bruno, Chief Financial Officer, Lincoln Electric: Yeah. So thanks for that question, Angel. We are seeing July order trends hold. So this is what gives us confidence as we provide an update to the assumptions. We’re seeing more strength in general industries as we wound up the second quarter.

As as Steve commented, volume trends were improving in general industries. More cautious, as you can expect, in heavy industries, being down low teens, seeing that progression, still into, the third quarter. And then on on automotive side, I’d comment that while the overall trends were up low single digits, a little bit more pressure on volumes as we saw progressively in the second quarter and as we enter the third quarter.

Andrew Costello, Analyst, Morgan Stanley: That’s helpful. Thank you. And then I was hoping you could help me understand I guess a little bit more of the kind of the Harris segment volume dynamic. It sounds like some of the volume uplift there was kind of driven by some inventory stocking ahead of the I think you said product rollout. But just curious, can you help us understand, I guess, maybe the underlying what the underlying kind of organic demand trends are like when you back that out?

And as we think about that restocking, I guess, how does that ultimately impact your second half or potentially first half of next year?

Gabe Bruno, Chief Financial Officer, Lincoln Electric: Yeah. Angel, great question. So in general, just think if we remove the initial stocking for a new retail customer in the channel, we’re probably more flattish type of volumes progressively as we go into the third quarter.

Conference Operator: Your next question is from the line of Saree Borbowski with Jefferies.

Saree Borbowski, Analyst, Jefferies: Hi, thanks for taking the question. Kind of building on the end market commentary, but you talked about customers deferring decisions. I was just curious if we get more tariff certainty, we have we now have the big beautiful bill, if you’ve seen any changes in behavior. And if not, what are customers waiting to see to execute on some of those elevated quoting levels that you talked about?

Steve Hedland, Chair, President and Chief Executive Officer, Lincoln Electric: Yeah. Sorry. I I think what you’re seeing is as the Trump administration starts to provide some clarity around the tariff rates for individual countries, the rules of the road are starting to get more firmly set up, which is, I think, been the key hang up for a lot of our customers who look at investments in CapEx, particularly around equipment and automation, you know, not wanting to put capacity or investments in the wrong place as the trade policy wins were were shifting constantly. So I think as we start to get a little bit more clarity on the on what the rules are gonna be going forward and hopefully those stabilize, I think that will really go a long way towards addressing the wait and see attitude that a lot of our taken. The one big beautiful bill will obviously try to create incentives and pressures for reshoring in America, and I think that will primarily benefit the general industry segment where we have a lot of the more smaller fabricators that are gonna see an uptick in demand and need to invest, particularly in automation to handle the additional volume, you know, despite the labor shortages.

Saree Borbowski, Analyst, Jefferies: Appreciate the color. And then you cited the 10,000,000 to $15,000,000 of savings in the second half, from permanent cost action. Could you just expand on some of those actions that you’re taking?

Gabe Bruno, Chief Financial Officer, Lincoln Electric: Yeah. So, really, just think about the actions as a continued focus on evolving the operating model. So whether it’s an organization or looking at facilities and shaping efficiencies for the long term, we just continue to look at opportunities to shape the model.

Conference Operator: Your next question is from the line of Bryan Blair with Oppenheimer.

Bryan Blair, Analyst, Oppenheimer: Thank you. Good morning, everyone.

: Good morning, Brian.

Bryan Blair, Analyst, Oppenheimer: Noted that automation quoting activity has been strong. That’s encouraging. Wondering if you could offer any finer points on that front. You just mentioned the one big beautiful bill. I suspect that’s going to be a good guy in terms of automation demand near to medium term.

I’m just curious what color you can offer.

Amanda Butler, Vice President of Investor Relations and Communications, Lincoln Electric: In the

Bryan Blair, Analyst, Oppenheimer: end, mostly curious how your team’s feeling about potential inflection in demand and sales right into 2026.

Steve Hedland, Chair, President and Chief Executive Officer, Lincoln Electric: Yeah. Brian, thanks for the question. You know, a lot of what’s happening is our customers are trying to figure out how they’re going to respond to the changes in trade policy in terms of what they make, where. And a lot of the quoting activity is driven by their contingency planning and their their desire to respond to whatever the ultimate rules of the road become. The wait and see approach is while the the rules aren’t finalized, so I don’t really know whether to pull the trigger on the investment you quoted for me in The US versus Canada versus Mexico, what capacity should I I be assuming, and the like.

So our our team is very encouraged that as the trade policy starts to get more firmly established, that that will encourage customers then pull the trigger on projects that we’ve quoted for them already. Now we’ve been in this wait and see approach for a while now, so I think we’re a little bit conservative in trying to prognosticate when, you know, the spigot is gonna get turned on. And there are portions of our business that are fairly long cycle, so we need to get the orders in hand before we can be confident about forecasting the future revenue of those. But in general, the market situation is very encouraging, and and we’re optimistic about the future with a conservative assumption that the businesses the automation business will basically stay steady through the second half.

Bryan Blair, Analyst, Oppenheimer: Okay. Understood. Appreciate the color. And you mentioned that international welding demand incrementally weakened during the quarter with that weakness more so outside core Europe. Can you offer a little more detail on that dynamic?

It would be helpful to know how international welding orders trended through the quarter and into July. Gabe, you had mentioned that July trends have held overall. Does that you know, include international welding? Just any any color, or nuance would be helpful.

Gabe Bruno, Chief Financial Officer, Lincoln Electric: Yeah, Brian. You know, when I talk about July, we’re I’m talking overall. So so that is a good observation you made, Brian. But when you think about international, there are a couple of dynamics that we kinda pointed to. One is the timing of projects, particularly comparing in the Asia side, the prior year.

And then on the on the the EMEA side, Turkey continues to operate in a challenged economic environment and as well as some project timing in Middle East and some areas of Europe. So if if you back those out, core Europe is probably tracking more into low single digit type progression progression of unreal organic trends.

Bryan Blair, Analyst, Oppenheimer: And the

Gabe Bruno, Chief Financial Officer, Lincoln Electric: time of a project have a meaningful impact on the overall trend. So that’s built into the overall outlook that we built into the assumptions.

Conference Operator: Your next question is from the line of Mig Dobre with Baird.

Mig Dobre, Analyst, Baird: Yeah. Good morning. So two things that that sort of stood out to me in your end market commentary was was automation. It’s you you talked about this business stabilizing, I think that’s interesting. And I’d like to hear more, of what you’re seeing in the auto component of that business, which is, you know, is quite large versus maybe some of the other industries that you’re exposed to in automation.

And then the second thing is general industries being up high single digit percent. I’m just kinda wondering what’s all in there. I I know smaller fabricators that you mentioned, but I would imagine maybe some of your distributors are are in this category as well. Do you have the sense that there’s been any demand pull forward or anything unusual happening in a channel as a result of these tariffs and your your own price increases?

Steve Hedland, Chair, President and Chief Executive Officer, Lincoln Electric: Yeah, Mig. I’ll I’ll provide some high level commentary and then let Gabe comment on specifics. With respect to automation, I think it’s important to note that our outlook for automation in the second half of the year is steady from the first half, and there is normally a fourth quarter pickup in automation. So the outlook that says steady for the second half actually does imply a decline versus prior year. But we think given where the business has settled in, that’s a a pretty, realistic and conservative call for the second half with maybe a little bit of upside potential for that.

And then with respect to your comment about general industries and the industrial distribution channel, remember that when we spoke last quarter, our concern was that we had to raise prices to offset tariffs. We were anticipating a demand elasticity response. Our call was that volume would offset price and and we’d be flat. And what we’ve seen is that volume has been less negative than we feared. Right?

So that leads you to the overall organic up.

Gabe Bruno, Chief Financial Officer, Lincoln Electric: It’s just to add the big on the automation side of things, when Steve refers to things being flat, that does imply for the for the full year that we’re down, call it, mid single digits. And we just haven’t seen the inflection of incremental orders yet. Although, as Steve mentioned, the quoting activity is very strong. The pipeline is very strong. We are, very positive in terms of the framework when we do see more confidence in the commitment to capital.

So we’re very well pastured for growth in the on on on the automation side of things. In general industries, you know, we do have the impact on HVAC act activity, HVAC activity in general industries. But overall, volumes are were were positive. And so while I can’t point to an inflection, I’m not aware of any buy forward of inventories that are occurring. We’re not seeing that in the channels.

So we’re monitoring that closely. Real positive within that on the consumable activity. As you know, that’s a reflection of factory activity. So we’re staying really close to it, trying to understand the drivers there progressively, from PM and I, industrial production trends. And and what we saw on the industrial distribution side of things is is is activity holding, and I’m considering, price impact and volumes and just seeing a a more favorable steady trend on industrial distribution.

So those are positive, trends, and and they are better than expected as we enter the second quarter.

Mig Dobre, Analyst, Baird: Understood. I guess my follow-up then, Steve, you you you kind of hinted in your prepared remarks at the next cycle and and and talk and mentioned margin. So I guess I I wanna ask you a question about that. When when we’re kinda looking here this year, last year, having to deal with, obviously, the volume, pressure that you have to deal with, margins have been quite resilient. And I’m I’m wondering how you think about or what the right framework to think about margin as we’re starting to see, hopefully, this volume recovery extended to 2026 and beyond.

How do you guys think about incremental margins? What’s the, right opportunity for for the company, especially with the with the cost takeouts that you had here and with automation now being a bigger part of the mix relative to where we were in the early cycle portion of the prior cycle.

Gabe Bruno, Chief Financial Officer, Lincoln Electric: Well, you know, Mick, the margin performance, as you point out, we’re pleased with the progression, particularly with opportunities we see within the business. And I just point to a couple. You mentioned volume, and I would point to our historical incrementals when we perform in volumes in the, call it, the mid single digits. We’re talking about potentially mid twenties type of incrementals. The automation side, which is, you know, it’s included in our mix of business and we’ve despite the the more flattish trending slightly down in automation, we’ve been able to kinda hold our overall operating margins with knowing that as we gain improvements in volume, our automation margins are gonna progress at a higher incremental level.

So that’s how we think of our our model. We continue to look for opportunities to shape our business. We expect that incrementals will progress as historically we’ve advanced, and we’ve got opportunities continuing on our the automation side of our business. And then I point to international as well. The targets we have established and with some volume improvement, we should also see improvement in margins the international side.

Conference Operator: Next question is from the line of Nathan Jones with Stifel.

: Morning, everyone. Morning, I guess a bit of a follow-up question on consumables and particularly focusing on The Americas. There’s obviously, you know, a lot of steel in the consumables that you sell. Interested in just hearing a little bit, you know, final point on what volume versus price was in the consumables. Just thinking primarily about, you know, as you said, it’s a it’s an indicator of what overall activity is.

So so just interested in some more color on volume versus price in the consumables business.

Gabe Bruno, Chief Financial Officer, Lincoln Electric: Yeah. You know, Nathan, in general, we don’t break out the pricing between the product offerings, but you could assume that pricing is a little bit higher on the consumable side than on the equipment side. And then what that means is that volumes held on the consumable side of our business to to be flattish type of a look. So we’re pleased with the progression. It is has been more resilient than we were expecting, and and we’re monitoring factory activity and how that progresses on the macro level.

: Okay. That’s helpful. And then maybe just any color you can give us on what we should expect for pricing in 3Q, just given pricing is going to be higher in the third quarter just based on timing of what you implemented during the second quarter. And then I guess just a follow-up on that would be, do you expect to have to go to the back to the market for any more price just given, you know, higher steel tariffs and potential copper tariffs coming along here or anything else that’s in the pipeline that might say you have to go back to the market for more price? Thanks.

Gabe Bruno, Chief Financial Officer, Lincoln Electric: So maybe I’ll answer that question first, the the latter the latter question, Nathan. We’re gonna respond with our price cost neutral posture as we’ve done. And so we’ll have to monitor what progresses from a trade actions standpoint as well as input costs. In terms of pricing going into the third quarter and the timing of actions taken in the second quarter, we do expect another two 100, 200 basis points of incremental pricing impact going into the third quarter from actions taken.

Steve Hedland, Chair, President and Chief Executive Officer, Lincoln Electric: And, Nate, just to follow-up on that, we have already taken pricing actions to cover the announced tariffs on steel and aluminum. So we would unless that, policy changes, right, we we would not need to take additional price on steel and aluminum. But as the country by country tariffs get finalized, then we’ll respond accordingly, as Gabe indicated, to maintain the the neutral price cost model.

Conference Operator: Your next question is from the line of Walt Liptic with Seaport Research Partners.

Walt Liptic, Analyst, Seaport Research Partners: Hi, thanks. Good morning. Hey, Paul.

Mig Dobre, Analyst, Baird: I

Walt Liptic, Analyst, Seaport Research Partners: ask about the wanted comments around incentive comp programs and how those were brought back in. So I just wanted to understand your thinking about why you brought it back. Was it because of the second quarter and, you know, the the, you know, the volume and pricing discussion that we’ve been having? Or is it you know, what, you know, what is it about, you know, now that you would bring back that incentive comp?

Steve Hedland, Chair, President and Chief Executive Officer, Lincoln Electric: Yeah. So, Walt, there’s two elements to that. One, the incentive comp, in bonus is really just formulaic based on the performance of the business. So there wasn’t really a decision to make on incentive comp. On the merit increases, which are base salary increases, if you recall, we announced a temporary pause in that because we were very concerned as we saw the shockingly high tariff proposals from the Trump administration and factored in the pricing that we would have to take to try and offset that, we were very concerned, that there was gonna be an overwhelming, demand elasticity response and that volumes could potentially, you know, fall off a cliff.

So as a prudent measure, we decided we didn’t wanna introduce more cost into the business in that time of uncertainty. We took a ninety day pause to, evaluate the demand input and the market’s response to the the tariffs and our pricing actions. And as we’ve been talking about throughout this call, right, the volume response wasn’t as bad as we feared, and so we decided to reinstate or restore the merit increase, you know, per our normal program.

Walt Liptic, Analyst, Seaport Research Partners: Okay. That’s great. Yeah. Thanks for for clarifying that. Yeah.

And I guess as a a follow-up, we’ve talked about the volume holding up a little bit better in the second quarter. Was there anything else that stood out to you in the quarter that was better than expected? Was it the price realization that you’re getting and pushback or anything else about the quarter that looked that was, you know, on the positive side?

Steve Hedland, Chair, President and Chief Executive Officer, Lincoln Electric: Again, it’s just it’s important to keep in mind, Walt, that in the first quarter, we had a big headwind from Turkey, Right? That was a a one time related to the work stoppage and the labor negotiations there. And in the second quarter, we we didn’t have that headwind, and

Gabe Bruno, Chief Financial Officer, Lincoln Electric: we also had a little

Steve Hedland, Chair, President and Chief Executive Officer, Lincoln Electric: bit of a tailwind from the load into a new large retail partner. So absent, those two things, we’re still encouraged by the strength of the business and the progression, and the resiliency that we see, but you have to in include those two one times as you’re comparing the sequential move from q one to q two.

Gabe Bruno, Chief Financial Officer, Lincoln Electric: But just to add, Walt, you know, on the pricing side, based on, what we saw, we’re right in line to what our communications have been. If you recall, we said, we expected pricing, to move in the mid single digits, and and that’s what we’ve seen now. We’re probably pushing with the full at full maturity and the higher end of that. But really, as we’ve been speaking to on the call, it’s the the resiliency in volumes are are where you you’ve seen the, which were stronger than expected.

Conference Operator: Our final question will come from the line of Steve Barger with KeyBanc Capital Markets.

Amanda Butler, Vice President of Investor Relations and Communications, Lincoln Electric0: Hey, thanks. Good morning, guys.

: Hey, Steve.

Mig Dobre, Analyst, Baird: Good morning.

Amanda Butler, Vice President of Investor Relations and Communications, Lincoln Electric0: Going back to some of the third quarter commentary, I hear you on the continued uncertainty, but as you noted, pricing is strong, comps are easy. So should we expect normal 3Q revenue seasonality of down kind of low single digits sequentially, or is there some other factor we should think about?

Gabe Bruno, Chief Financial Officer, Lincoln Electric: No. I think it’s a fair observation. Just progressing in our normal, seasonality is a good assumption.

Steve Hedland, Chair, President and Chief Executive Officer, Lincoln Electric: And with the caveat, Steve, that we’ll start to see now the sell through replenishment of the the new retail customer, but we won’t have the one time load in that we had in the second quarter.

Amanda Butler, Vice President of Investor Relations and Communications, Lincoln Electric0: Yep. Understood. Back to the quoting activity in robotics. During the quarter, we saw an announcement between the largest cobot OEM and one of the biggest global robotics consumers. In some industries, seeing a big player make an investment can spur activity from fast followers.

Do you see dynamics like that in your business, or is each deal more idiosyncratic?

Steve Hedland, Chair, President and Chief Executive Officer, Lincoln Electric: Steve, we’re really focused on trying to, you know, solve the customer’s challenge of attracting and retaining labor to to drive their operations. And, you know, one of the biggest barriers for somebody to adopt automation is ease of use, ease of programming, ease of setting welding parameters, and the like. So we’re singularly focused on trying to make automation easier for customers to deploy and adopt into their operations to a degree that there are other participants in the market that help, amplify the message to the end user that they need to automate to survive, you know, that that’s fine with us, but we’re focused on our strategy and playing our game.

Conference Operator: This concludes our question and answer session. I will now turn the call back to Gabe Bruno for closing remarks.

Gabe Bruno, Chief Financial Officer, Lincoln Electric: I’d like to thank everyone for joining us on the call today and for your continued interest in Lincoln Electric. We look forward to discussing the progression of our strategic initiatives in the future. Thank you very much.

Conference Operator: This concludes today’s call. Thank you for joining. You may

Andrew Costello, Analyst, Morgan Stanley: now

Conference Operator: disconnect your lines.

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