Lincoln Electric Holdings
Sup mf’rs, it's Gabe Azar, Managing Director and Head of Burrito rolling of the Azar Capital Group. Your pet fish’s favorite investor. Currently reporting to you nerds from my L desk. Today, I am writing about Lincoln Electric Holdings. Now sit back and enjoy. And remember, buy low and sell high, my friends.
Lincoln Electric has been in the business of sticking things together since 1895, when John C. Lincoln created LECO with a $200 investment and the dog within him. The company has spent the last lots of years, do the math you nerd, quietly becoming the world's largest manufacturer of arc welding solutions. LECO currently operates across 20 countries, employs more than 12,000 people, and generates about $4.2 billion in annual revenue. LECO is the company's ticker, as I don’t want to type out Lincoln Electric all the time, so I will be using LECO for the rest of the blog. While being a publicly traded company, LECO has one of the longest profit-sharing and employee incentive programs in American manufacturing history. This has enabled the company to consistently punch above its weight on employee retention, margins, return on capital invested, and shareholder value compared to its peers.
Lincoln's vision is short and easy to understand: “help customers manufacture and maintain vital equipment and infrastructure.” LECO has just published its new five-year strategy, RISE, Reimagine, Innovate, Serve, and Elevate, which is less of a rebrand and more of an evolution of the company’s mission. Management’s goal is to shift from a collection of regional autonomous businesses to a globally coordinated, center-led enterprise that can deploy more efficiently, leverage its scale, and reduce redundancy across its entire supply chain. Management also noted that they are gunning for sales above $6 billion, operating margins above 19%, and strong EPS growth by 2030. LECO’s management team is noted for doing, not just talking; they walk the walk. However, great predictions and guidance come with great responsibility to shareholders.
A major catalyst is hiding in plain sight, one that many companies are running from; LECO could potentially be running towards it. This catalyst is automation and robotics. Robots won’t replace LECO; they will become customers. Every automated welding cell, every robotic arm will still need Lincoln’s consumables to do the actual work. The torch is only changing hands from a human to a machine; the raw material supply chain will be staying put. Risks are still incoming; automation margins for Lincoln have historically been dilutive to the rest of the firm's portfolio. Lincoln's European business is also struggling with no near-term catalysts, although management has stated they aren’t worried about Europe as a part of its 20230 plan. Tariff exposure is also still on the table as Lincoln is currently facing rapid trade policy shifts.
Lincoln operates through three core segments that include its North American welding business, which represents roughly 64% of total sales, and its International welding unit, which contributes nearly $1 billion in sales. Then there is the Harris Products Group, which has about $600 million in yearly sales. Those sales are coming from several product types that include consumables like welding wire, filler metals, brazing, and soldering materials, which represent about 54% of total revenue. Lincoln Electric equipment segment contribed $1.08 billion in revenue, which covers power sources, cutting systems, wire feeders, and accessories. Automation, despite being a major potential bull case for LECO, saw a minor decrease in revenue from its peak in 2023, but they have also seen a major increase in order momentum coming in 2026. Lincoln's consumable revenue base is extremely hard to disrupt and a durable source of revenue through boom and bust cycles, as demand for the consumable products rarely sees major declines.
The arc welding and cutting industry isn’t making front-page news or getting invited to many conferences, but this is why we love it. It's a sleeping giant for those in the know. The TAM for this market is smaller than most industries we have covered, currently sitting around $20 billion annually. But it quietly underpins almost every physical asset built, such as bridges, pipelines, ships, cars, data centers, power plants, and defense hardware. This industry is very mature in developed markets with predictable and defensible revenue that is deeply embedded in the global manufacturing supply chain. Like many manufacturing industry segments, the arc welding and cutting segment is highly fragmented at the regional level but concentrated at the top. LECO holds the global market leadership as the world's largest welding solutions manufacturer. They compete against a handful of global players and a much larger universe of smaller regional players who specialize in niche markets.
The welding industry serves a diverse set of markets, which is both a strength and a complex. General fabrication is the broadest bucket served by the industry, which includes metal shops, job shops, and contract manufacturers. This segment is the most sensitive to the general industrial cycle and a useful tool for understanding where the industry is heading. The Energy industry is currently generating major tailwinds as oil and gas, next-generation energy facilities, and process industries all require heavy welding for construction and maintenance purposes. Heavy industries like shipbuilding, defense, heavy fabrication, and maintenance operations are also experiencing a comeback as defense spending accelerates globally and aging infrastructure needs replacement. Automotive and transportation remain the largest sectors for automation.
The largest tailwind for Lincoln Electric is the current shortage of welders, a problem that is only getting worse. The American Welding Society estimated that the shortage of welders is several hundred thousand in the United States alone. This is mainly driven by the aging workforce retiring faster than new entrants are joining the trade. Lincoln has been on both sides of this for the past 130 years as they have been training new welders and supplying their materials, and now they are positioning themselves to supply the machines that may replace humans. However, the shortage of welders is a major near term problem for Lincoln. The nearshoring of major industries and manufacturing represents another major value add for the industry as companies begin rethinking where manufacturing happens. Many of the largest companies in North America are committing tens of billions of dollars to bring production back to North America/ the United States. Government bills and acts have also acted as quasi purchase orders for welding consumables, as the demand for EV infrastructure, grid infrastructure, and the YUGE capital commitments going into data center construction all require massive amounts of welding stuff.
If you’re a doomer or chronically online, you may believe that robotics and AI are disrupting this industry, but those nerds are misunderstanding where LECO and its competition sit in the value chain. Yes, automation welding systems will replace human welders, and yes, AI-guided vision programs can now weld complex geometries without CAD files. But none of this can happen without the welding consumables; robots will still need the wire, and the automated tools will still consume filler metals at the same rate (or a higher rate) than a human welder would. The revenue from consumables, if anything, will be stronger during the highly automated days, robots don’t call in sick, take breaks, and can run at higher rates than human operators. Where our thesis jumps outside of the box is that robotic systems will create new safety systems and requirements that didn’t exist with human-operated systems. A human welder wears safety gear like glasses and a helmet. We believe that robotic systems will need similar “safety” gear, like optical sensors, servo components, and internal components that protect the machine from splatter, heat, and electromagnetic interference that may come from welding. While this is currently a niche market, it could generate a meaningful percentage of revenue as automation density in factories increases.
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Lincoln Electric's competitive environment looks intimidating on paper until you realize that most of its competitors operate on a global scale or are either privately held, operate as a small division of a much larger conglomerate, or are a regional specialist who can’t compete on LECO’s scale. Lincoln’s major competition includes Illinois Tool Works, Esab Corporation, Kemppi, and tons of smaller regional players across Asia, South America, and Europe. Lincoln is able to compete with every single one of these firms, although not all of these firms can compete against Lincoln everywhere. Not only does Lincoln have that scale, but it also has that mf’n technical knowledge and depth that creates real barriers. Esab has shown that they are the most direct competitor to LECO as a pure welding play, but LECO has shown superior margin performance and ROIC through the cycles. Foreign integrated steel producers who also manufacture consumable products are the most credible emerging threats, but none of them have shown the full-stack capability that Lincoln has spent over 100 years building.
Lincoln has been able to build one of the strongest brands in industrial assets that basically functions like a consumer brand in terms of customer loyalty. Welders develop preferences early in their careers and rarely switch. When a welder trusts a specific wire formulation or power source to produce consistent results, the switching costs aren’t just price but include testing, retraining, weld procedure documentation, and ultimately liability exposure if something goes wrong. Lincoln’s employees are highly trained welding engineers and specialists who are able to sit with customers, diagnose challenges, and engineer solutions using Lincoln’s product portfolio. Lincoln also holds a large patent portfolio centered on arc welding technology and actively protects its innovations across international jurisdictions. The company also invests a significant amount of revenue back into R&D projects, along with making acquisition plays like Inrotech. Lincoln also has a global manufacturing footprint across 20 countries, enabling it to manufacture gear near regional demand centers, minimize logistics costs and tariff exposure, and maintain the quality its customers demand.
As per usual with most of the companies we write about, the barriers to enter this industry and segment are yuge. The capital required to build a global manufacturing across 20 plus countries, establish quality certifications at dozens of facilities, develop a technical sales force, and build brand recognition is something that a large check can’t simply take care of. Switching costs are even a strong moat / competitive advantage for LECO, as customers want quality products that they can trust and have the certifications behind them. Once a Lincoln product is brought into a welder's supply chain or company, removing it requires repeating a qualification process from scratch; this process costs time, money, and carries execution risks that most procurement managers have no appetite for. Even during downtuns, volume rarely sees major compressions, and they are able to recover quickly when industrial activity normalizes. In a world where people are obsessed with recurring revenue, more people should think of Lincoln as a CaaS, or Consumables as a Service.
Financial Analysis - Written by Claude aka Anthropic aka AI
Lincoln Electric's income statement tells the story of a company that knows how to protect its earnings even when the top line gets choppy. Revenue came in at $4.23 billion in 2025, up 5.6% from 2024, though it's worth noting that the growth was largely price-driven — volume was actually down 3.7% as industrial capital spending stayed cautious. The more impressive number is what happened below the revenue line. Gross margins held at 36.2%, operating margins expanded to 17.0% from 15.9%, and net income grew 11.7% to $520.5 million. Adjusted EPS hit a record $9.87. For a company navigating a genuine volume headwind, those are the margin defense numbers of a business with real pricing power and a cost structure that management actually controls — not just talks about controlling.
The balance sheet is solid without being pristine, which is exactly what you want from a capital-deploying compounder. Lincoln carries $1.29 billion in total debt against $309 million in cash, putting net debt at roughly $985 million — a manageable load given the company generates over $660 million in operating cash flow annually. The debt is well-structured with a weighted average interest rate of 4.2% and average tenor of 8.7 years, meaning there's no refinancing cliff coming to ruin anyone's day. Goodwill sits at $887 million following several years of acquisitions, worth monitoring but not alarming given the quality of the deals. The inventory build — up $89 million year-over-year with finished goods jumping 29% — is management's deliberate choice to position for the anticipated demand recovery, not a sign of demand destruction. The $858 million available on the revolving credit facility gives Lincoln plenty of dry powder for opportunistic M&A without needing to tap capital markets.
This is where Lincoln's quality as a business really shows up. Operating cash flow hit $661 million in 2025, up from $599 million in 2024, and free cash flow came in around $534 million after $127 million in capital expenditures. Cash conversion has been consistently strong — management is targeting 100% conversion through the 2030 RISE cycle, and the historical track record backs that up. The OBBBA tax provisions gave cash taxes a one-time tailwind in 2025, dropping cash tax payments to $101 million from $158 million the prior year, so some of the cash flow strength is transitory. Even stripping that out, the underlying FCF generation is exceptional for a business of this size and capital intensity. At a rough $534 million FCF against a market cap in the mid-$13 billion range, the FCF yield sits in the 3.5-4% neighborhood — not screaming cheap, but respectable for a compounder with a credible path to significantly higher earnings power.
Lincoln trades at a premium to the average industrial, and the premium is largely justified by the returns profile. Adjusted ROIC sits at 21.3% — a number that puts Lincoln in a genuinely elite company among industrial manufacturers and reflects both the quality of the business model and the discipline of capital allocation. On a valuation basis, the stock trades at roughly 24-26x forward earnings depending on your 2026 estimate, with EV/EBITDA in the 14-16x range — ahead of broad industrial peers but roughly in line with high-quality compounder comparables like ITW and Graco. Return on equity is strong given the leveraged balance sheet and aggressive buyback program. The honest caveat is that Lincoln isn't cheap on any traditional screen, and investors buying today are paying for the RISE strategy execution and the volume recovery in automation — both of which are probable but not guaranteed. The valuation leaves limited room for disappointment in the near term, which is worth keeping in mind when sizing a position.
Lincoln runs a capital allocation playbook that is straightforward, disciplined, and shareholder-friendly without being reckless about it. The rough framework over the prior strategy cycle was 48% of capital deployed toward growth — internal capex, R&D, and acquisitions — and 52% returned to shareholders through dividends and buybacks, and management intends to maintain that balance going forward. The dividend program is a point of genuine pride — 30 consecutive annual increases qualifies Lincoln as a dividend aristocrat, with the most recent hike a 5.3% increase declared in January 2026. Buybacks ran at $338 million in 2025, though management has flagged a more measured ~$75 million baseline annual repurchase with opportunistic additions using excess cash. The tension worth watching is whether the simultaneous ambitions of accelerating R&D, pursuing techisitions, maintaining dividend growth, and buying back stock can all be funded comfortably off a single cash flow engine — the math works today, but a meaningful acquisition or a sharper-than-expected volume disappointment could force some prioritization decisions that investors should be thinking about in advance.
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Lincoln Electric’s organic growth is strong, growing at a 8% rate in 2025 excluding its automation segment. Lincoln’s business has real momentum, with its core consumables segment being the company’s quiet hero, while other segments took minor hits. When the capital spending cycle turns, the combo meal of accelerating automation orders, OEM capital spending announcements, and manufacturing PMI pivot to expand their operations, Lincoln will be prepared to pounce on the opportunity. Pricing power is one of Lincoln's most underrated growth levers, and in 2025, the company pushed 6.2% price increase across its business while volumes decreased. Lincoln expects its price to increase and believes its volume will quickly recover, and when it goes, they will see a margin expansion. Lincoln has also noted that it's looking into international expansion in areas like the Middle East and the Asia Pacific, as these regions are seeing massive increases in industrial-based projects. Although in Europe the company is focused on efficiency rather than growth, which makes sense as Europe is not focused on building great new projects.
Over the past few years, Lincoln's M&A track record has been more focused on capability assembly operation offerings rather than bolt-on plays. The Inrotech acquisition brought proprietary vision-based AI welding technology systems without CAD files. The Red Viking acquisition added autonomous guided tools that extend LECO's automation reach into aerospace and defense. Lincoln has also made other acquisitions that expanded its reach in mobile power solutions, maintenance and repair within proprietary wear solutions, and digital monitoring. With each of these deals expanding Lincoln’s TAM, as more automation adoption globally means more demand for the products and services surrounding automation. This technological acquisition strategy has been focused on technology capabilities rather than adding revenue. This enables Lincoln to deploy these tools across its entire base without spending the capital to develop these projects in-house. Each acquisition was in the $30-150 million range, which didn’t strain the company’s balance sheet. Lincoln also has strong relationships with defense contracts and other firms within the maritime industrial base. Combine this with the Red Viking tools they can create platforms for deeper relationships that could predict long-term revenue streams. Lincoln historically has been conservative about joint ventures as they prefer outright ownership, though as their technology develops, licensing and partnership models could begin to generate an additional revenue layer.
The industrial recovery catalyst is the most immediate and discussed segment that the benefit believes they will be able to take advantage of. Lincoln started to see order rates accelerate at the end of 2025, and management noted they have a large backlog of volume that they believe will come to fruition in the middle of 2026. The great capex drought of 2024-2025 created a pent-up demand for deferred automation projects that still need to get done. When the demand returns fully, Lincoln will have a stronger automation technology portfolio than it did in prior cycles. The increased demand for energy, data centers, and many other infrastructure types will drive serious demand for the Lincoln products. Margin improvement is also a potential growth catalyst as the company aims to reach high 20% operating margins. Management has noted that these plans are a part of its long-term vision rather than a single step jump, which they believe will be a more credible delivery tool than promising a quick transformation that may never arrive.
Lincoln plans on spending $130 million in capex in 2026, tied explicitly to safety, growth, and productivity-oriented projects across its global supply chain. It’s a U.S.-based property that includes plants and equipment, which grew from $344 million to $403 million, reflecting real capacity additions at the exact moment when reshoring trends began. Lincoln’s international PP&E also grew in areas like the Asia Pacific and the Middle East, as the company seeks to build out capacity ahead of any anticipated demand. Lincoln has also continued to invest in R&D; in 2025, it invested $85.6 million, a 35% increase in two years. This capital was spent to develop projects across automated welding intelligence, wear solutions technology, and digital monitoring capabilities. The Inrotech acquisition is the most visible output of this as they are producing the company’s first autonomous welding solution using vision and AI to adjust welding variables in real-time without human input.
Lincoln Electric has a global supply chain that spans across 20 countries. This gives them a strong competitive advantage as it can act as a hedge against tariffs and logistics disruptions. Lincoln’s raw material supply chain includes steel, copper, silver, brass, aluminum alloys, electronic components, and robotic components, which they manage with sophistication. Lincoln's pricing mechanism for commodity-intensive products like Harris’s brazing consumables includes mechanical price adders that are tied to commodity spots, which are largely passed through to customers rather than the LECO absorbing the costs into its margins. Lincoln also has a strong supplier financing program that enables key suppliers to factor receivables at favorable terms without Lincoln taking on any balance sheet risk. This leads to strategic inventory building, ensuring that Lincoln can serve its customers through supply disruptions that competitors with leaner inventories cannot match. Lincoln’s digital supply chain is making serious moves as the company shifts from regional autonomous processes to standardized global demand forecasting, order entry, and supply chain planning systems that are essential to deploying automation. At the end of the day, Lincoln will have an extremely strong digital supply infrastructure that amplifies its world-class physical network and its modernized digital operations that competitors won’t be able to match.
While Lincoln’s supply chain is one of its greatest strengths, it is also the most complex and vulnerable segment of the company, as running manufacturing networks across 20+ countries means 20+ regulatory environments, labor dynamics, and hundreds of different points of potential disruption from geopolitical shit, natural disasters, or other random shit that may go dahn. The company is also heavily exposed to commodity price swings that can move faster than its pricing mechanisms can adjust to the changes. Historically, Lincoln has been able to cook in this arena, but as they grow and their supply chain grows to include higher technology solutions, Lincoln will need to maintain these segments that will require more sophisticated supply chains. Management risk is another hoop investors must pay attention to, as the company has a strong track record of doing what it says it will do. Steve Hedlund (CEO) and Gabe Bruno (EVP / CFO) have built real credibility that successors won't pass down. Credibility is something that is earned over many years of doing what they say. Execution risk is also on the rise as the company begins its RISE strategy to transition from a collection of regional businesses to a global enterprise organization.
Automation drag is the largest immediate margin / financial risk for Lincoln, as automation currently runs below the company’s margin profile and management expects this segment to recover in the years to come. If the capital spending in automation is slower than expected, the margin improvement nation could stall out, hurting any potential long term valation. Despite focusing on R&D, acquisitions, and increased capex, Lincoln is still committed to growing its dividends and share buybacks. The company’s operating cash flow is large enough to handle this in a normal year, but if they saw a massive decline in volume, they would be forced to switch up their priorities. The boys at Azar Capital Group believe LECO should pause share buy-backs and lower dividends to increase capex and R&D spend over the next few years to focus on automation and future tooling. Lincoln is currently trading at a premium compared to its peers as the market is pricing in a successful RISE strategy, volume recovery, potential margin expansion, as well as continued geographic growth in the Middle East and Asia.
As a global organization, Lincoln is heavily exposed to regularity and tariff risks, and these risks are fully out of the company’s control. Management has been able to successfully navigate the great tariffs of 2025 due to the company’s distributed footprint, providing it with protections that most cannot compete with. Lincoln is also heavily exposed to pricing pressures related to the consumables market, as companies in Asia have been encroaching on the domestic arc welding market for the past decade. The risk increases at the lower end of Lincoln’s consumables range, as basic wire and electrodes for general fabrication are at high risk from competitors willing to sell products at steep discounts. Managing the product mix towards higher margins and higher-value, more differentiated consumables is Lincoln’s goal, but the commodity pressure at the bottom of its product pyramid doesn’t disappear. This leads to the obvious demand risk, as Lincoln’s end markets are all sensitive to economic cycles that are well understood but impossible to time. A global recession or a significant drawback in manufacturing activity could hurt Lincoln’s equipment and automation volume and put meaningful pressure on consumables revenues.
We believe that Lincoln Electric, aka Billy, is extremely well-positioned to capture new and convert its current backlog revenue into real mf’n realized gains. Lincoln’s consumable business has been strong even during downturns, and OEMs are announcing higher capital spending plans for 2026. Reshoring is a major catalyst that will only grow as time moves on. Electrification and the Middle East and Asia Pacific infrastructure build-outs are also major potential catalysts that Lincoln will be able to eat from. If the lunch buffet at Lincoln is looking as good as the management team is saying, the second half of 2026 will be banging, and 2027 will be the year the RISE strategy starts showing up in ways that will be hard to ignore. While there is a low probability of any macro deterioration or industrial delays happening, the RISE strategy could see a delay in its effects. Lincoln could also see a rise in competition from AI-enabled robotic newcomers with cheaper offerings, as well as any capital allocation missteps that could damage the company’s balance sheet. Lincoln's European segment remains slow with no clear short-term catalysts in the pipeline.
The big bad dawgs over at Azar Capital Group believe that Lincoln Electric is greatly misunderstood, and they aren't shown the love they so greatly deserve. This company is a generational compounding machine that will boom when automation and robotics catches up to the hype that it's currently being given. Robots won’t be replacing Lincoln Electric; they will become the company's greatest customer, as they don’t eat, sleep, or shit, they just grind. A robotic welding cell runs 24/7/365, consuming Lincoln's wire, filler metals, and electrodes that no human could match. The transition from human welders to automation welding won’t decrease volume, but it will increase demand drastically. Just picture that scene in Star Wars: Attack of the Clones, where they are in the drone manufacturing facilities. That's what modern manufacturing facilities could look like, non-stop grinding. While the risks are real, we simply don’t give a fuck about them because the potential demand will be huge.
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Disclosure
Great moments are born in great opportunity, and that's what you have here, that's what you’ve earned here tonight. Tonight we long, tonight we long shut them down because we can. Tonight, we are the greatest firm in the world. I don’t think anything is going to be hard. What is there to lose? There's nothing to be lost, nothing to complain about. I can’t think of anything that I would find stressful or could bring us down. This analysis is strictly for informational and entertainment purposes only and is absolutely, positively NOT financial, investment, legal, or professional advice of any kind. It’s not a golden ticket, a sure bet, or a substitute for your own brainpower. Markets are a rollercoaster, and losses can hit harder than a freight train—consider yourself warned. Investors must do their own hardcore due diligence, dig into the details, and/or consult a licensed financial advisor, accountant, lawyer, or whoever else you trust before even thinking about making investment decisions. Past performance? The author, this platform, and anyone remotely connected to this content take zero responsibility for your financial moves, wins, or wipeouts. Instead of looking up to Thomas Jefferson, or looking up to Nikola Tesla, or looking up to Magellan, I mean, kids, Magellan is a lot COOLER than Justin Bieber! He circumnavigated with one ship the entire planet! He was killed by wild natives before they got back to Portugal! And when they got back, there was only like eleven people alive of the two hundred and something crew, and the entire ship was rotting down to the waterline! That's destiny! That's will! That's striving! That's being a trailblazer! An explorer! Going into space! Mathematics! Quantum mechanics! The secrets of the universe! It's all there! Life is fiery with its beauty. It's incredible detail tuning in to it. Unlock your human potential, defeat the globalists who want to shutter your mind. I want to see you truly live, I want to see you be who you truly are! I don’t want my progyny whos coming, my unborn grandchildren and great grandchildren to live in this nightmare system these control freaks created. Thats why I don’t have fear, I only have fear of myself and my flesh and not being up to the challenge. I ask you to look in the mirror and ask yourself, what are you doing in this time of great challenge, what are you doing to unlock minds? Once you unlock a mind, once you unlock somebody, then they can unlock their soul. Just let the regulators know that we have a finite time on this planet, and you can be viciously mediocre, you can get after it. And to the haters, we have been honed into a machine of lethal moving parts that you would be wise to avoid if you know what's good for you. We will not be intimidated, we will not back down. We've seen war; we don’t want war. But if you want war with the United States of America … someone else will raise your sons and daughters. I love burning the short sellers. Some also may say I'm not even a good trader, I'm just lucky. To them I say, what's the difference? Thank you for your attention to this matter. See you later, spacecowboy.