Lincoln Electric CEO Says Data Center Builders Keep Him 'One Step Behind' On Costs
Steve Hedlund described a "whack-a-mole" of supplier price hikes, even as the welding maker posted record third-quarter sales and earnings.
Lincoln Electric, the welding and cutting equipment maker, is competing with data center builders for the same parts, CEO Steve Hedlund said on the company's third-quarter earnings call Tuesday. Hedlund, who is also chairman, said that has left the company "constantly one step behind" on cost increases, even as quarterly sales rose 15% to $1.221 billion.
A game of whack-a-mole
Hedlund called the persistent inflation "a constant game of whack-a-mole" of surprise cost increases from suppliers, who are seeing rising demand from data centers. "So we're competing for the same parts as people building data centers in many cases," he said.
He added that the company has been aggressive on price but has "been constantly one step behind, which is not a position we'd like to be in." He also said Lincoln believes it has taken enough price to cover the costs it already knows about.
Chief Financial Officer Gabe Bruno said gross margin fell 190 basis points (1.9 percentage points) to 34.8%, mainly because new price increases took effect late in the quarter, along with unfavorable mix. Year to date, Lincoln is lagging its price-cost neutrality target by 100 basis points, and Bruno expects to reach neutral in the fourth quarter. Price actions were taken in all three segments, and he expects fourth-quarter gross margin to exceed the year-earlier quarter and incremental margins in the mid-20s at the fourth-quarter exit.
Customers are not pushing back
Asked by a Morgan Stanley analyst about elasticity, Hedlund said "we're not getting a tremendous amount of pushback," because distributors and end users face the same inflation and know parts of the economy are running hot on AI data center build-outs.
Volume is rising too. Organic sales growth was in the mid-teens, led by 9% volume growth, which Hedlund said was the first quarter in over two and a half years that volume outpaced price. Adjusted earnings per share rose about 21% to a record $2.98. Americas Welding sales rose about 16% to $801 million, and Harris Products Group sales jumped 29% to $193 million, with about 26% higher price, driven largely by silver costs.
Bruno estimated less than 5% of Lincoln's overall business is tied to data center activity, mostly indirectly, and mid to high single digits of Harris.
Raised outlook and the stock
Lincoln now expects full-year sales growth in the low teens percent range and raised its 2026 capital spending range to $140 million to $150 million, from $110 million to $130 million. In the quarter it returned $143 million to shareholders, including $43 million in dividends and $99 million in buybacks. The board recently raised the annual dividend rate 10% to $3.48 a share.
Shares were up about 9% at $281.73 in Tuesday trading, giving the company a market value of $14.1 billion.
Hedlund also pitched ExpertLink, a physical AI system that lets welding robots adapt to variable parts. It carries a subscription of about $3,000 a year per robot arm after the first year.
Bruno's test comes in the fourth quarter, when he expects price-cost to be neutral and gross margin to top last year's.
Sources
- Lincoln Electric Holdings Q3 2026 Earnings Call Transcript — benzinga.com
- Lincoln Electric Holdings (LECO) Q3 Earnings and Revenues Top Estimates — Yahoo Finance
- Lincoln Electric (LECO) Q3 Earnings: How Key Metrics Compare to Wall Street Estimates — Yahoo Finance
- Lincoln Electric Non-GAAP EPS of $2.98 beats by $0.17, revenue of $1.22B beats by $50M | Seeking Alpha — seekingalpha.com
- SWK or LECO: Which Is the Better Value Stock Right Now? — Yahoo Finance
