Lincoln Electric's Volume Inflection: From Compression to Record Backlog
After nine quarters of declining volumes, the welding giant sees a broad-based recovery in Americas and automation, raising full-year guidance.
LECO · Earnings Call · 2026-07-30
The Inflection
After nine quarters of volume compression, Lincoln Electric's second quarter marked a clear turning point. CEO Steve Hedlund opened the call with a definitive tone:
Second quarter marked a solid inflection to volume growth in the business after 9 quarters of compression, led by strength in the Americas Welding segment.
That inflection is not just a one-quarter blip. “We've seen really broad-based strengthening in the demand profile for the automation business” — Steven Hedlund, Executive (likely CFO or similar senior finance role) · 2026-07-30, Hedlund added, pointing to record level of backlog and a broad-based improvement across four of five end markets. The broad base of recovery—from general fabrication growing over 30% to energy up nearly 30% in Americas—signals not merely a cyclical uptick but a durable shift in customer confidence to invest in capital equipment.
Price, Costs, and Tariffs
The company has been navigating a turbulent price/cost environment, accelerated by Section 232 tariffs and persistent inflation. CFO Gabe Bruno noted that they ended Q2 at only a 10 basis point price/cost headwind, “which is actually better than we expected” — Gabriel Bruno, Executive (likely CEO or President) · 2026-07-30, and they expect to reach neutral in the back half. A key swing factor has been the tariff refund, which helped Harris Products' EBIT margin rise 100 bps to 20.4% in the quarter. This theme is not unique to Lincoln—tariff refunds have been a recurring topic across this earnings season, including at AAPL and BAX—but Lincoln's ability to convert them into pricing power and cash flow is notable.
Automation and Forward Guidance
Automation continues to be a growth engine. After a choppy 2025, order intake has accelerated. “We are now raising our full year net sales growth assumption to a low double-digit percent rate” — Gabriel Bruno, Executive (likely CEO or President) · 2026-07-30, Bruno said, with organic sales now expected in the high single-digit to low double-digit range. This is a meaningful upgrade from the mid-single-digit guidance given in February, when management was still cautious. “We're seeing good order rates in the Americas business” — Steven Hedlund, Chief Executive Officer · 2026-04-30 was the tone then; now they see record backlog and confidence in the durability of the recovery.
Lincoln's revenue hit $1.22 billion in Q2, a 12% increase y/y, with volume turning positive for the first time in over two years. The operating leverage is also visible; adjusted operating income margin expanded 50 bps to 18.4%, and cash conversion hit 138% for the quarter.
Risks and Outlook
Not everything is rosy. International Welding volumes remain challenged, with the Middle East conflict now expected to be a $6-7 million headwind per quarter. Europe is still weak, and LIFO charges are expected to be a $10 million full-year headwind. Yet the balance of risk seems to be to the upside. As Gabe Bruno said in the prior quarter, “we do expect to turn to modest growth on the automation side as we exit Q2” — Gabriel Bruno, Chief Financial Officer · 2026-04-30—and they have clearly exceeded that.
Lincoln's 23% ROIC and continued capital returns ($120 million returned in the quarter) reinforce the narrative of a company leveraging a cyclical upturn while executing on its RISE strategy. The record backlog gives management unusual visibility, and the raised guidance reflects real demand. The key question for investors is whether this is the start of a multi-year upcycle or just a temporary reprieve—but for now, the evidence strongly favors the former.