Lincoln Electric: The 2026 Reset and the Expectation Gap

The market's view of Lincoln Electric is undergoing a clear reset. After a period of aggressive price target raises earlier in 2025, the consensus is now pulling back, setting a new and lower bar for what constitutes a positive surprise. This shift is the foundation for the expectation gap we'll examine.

The recent cuts by Morgan Stanley and Stifel are the clearest signals. On January 12, Morgan Stanley analyst Angel Castillo trimmed the firm's price target to $208 from $209, maintaining an "Underweight" rating. Just weeks prior, on December 16, Stifel had already cut its target to $252 from $265, citing the fading of tariff-driven price increases. These adjustments mark a decisive retreat from the bullish momentum of the prior months, when Stifel had raised its target to $265 in October and Barclays had lifted its to $260.

The divergence in near-term outlooks is stark. While these firms are lowering their targets, the broader analyst community still holds a much more optimistic view. The median price target across 10 analysts remains high at $262.44. This creates a clear tension: the consensus expects significant upside, but a growing number of key analysts see the path to that upside as more challenging. The reset is not about abandoning growth, but about redefining its source.

The new narrative, as articulated by Stifel, is that 2026 volume growth will improve as inventory destocking fades, with pricing carryover supporting only low- to mid-single-digit revenue growth. This is a critical shift. For much of 2025, growth was powered by pricing power from tariffs. The expectation now is that volume recovery will be the primary driver in 2026, resetting the bar for a "beat." The market is being told that Lincoln's future earnings will depend more on economic activity and less on its ability to raise prices.

The 2026 Growth Engine: Volume vs. Pricing

The 2026 reset is a fundamental shift in the growth narrative. For much of 2025, Lincoln Electric's story was one of pricing power. Analysts noted that growth in diversified industrials during 2025 has mostly been driven by tariff-related price increases, with volumes generally flat to slightly lower. This created a setup where the company could offset weak demand with higher prices, protecting margins but not necessarily expanding its customer base.

The expectation gap now hinges on the transition from that model to one where volume recovery is the primary engine. Stifel's outlook is clear: 2026 volume growth will improve mainly as inventory destocking fades, with pricing carryover supporting only low- to mid-single-digit revenue growth. This resets the bar for a "beat." A quarter that merely maintains flat volumes after a year of pricing-driven growth would likely be seen as a disappointment, not a success.

The underlying business reality shows this tension. While the company has demonstrated resilience through strategic pricing, the recent performance of its segments tells a more complex story. The equipment segment's turnaround is a positive sign, but the automation business-key for long-term margin expansion-remains depressed. Management is seeing record quoting activity and accelerating long-cycle orders, which could signal a catalyst for a multi-year capex recovery. However, current automation sales are still depressed at ~$200 million quarterly due to deferred capital spending. This is a long-cycle play, not a near-term volume relief valve.

The bottom line is that the market is being asked to price in a more cyclical path. The 2026 reset means the company's earnings will depend less on its ability to raise prices and more on the broader economy's health. For investors, the key will be watching for the first clear signs that inventory destocking is truly over and that volume growth is accelerating beyond the low-single-digit range that pricing carryover can support. Until then, the expectation gap between a pricing-powered past and a volume-driven future will keep the stock under pressure.

Catalysts and Risks: The February 12th Inflection

The expectation gap will be tested head-on on February 12, 2026. That is the date of Lincoln Electric's pivotal event: the release of its fourth-quarter and full-year 2025 results, followed by an investor call to introduce new 2030 strategic targets. This is the inflection point where the market will see if the volume recovery narrative is gaining traction or if pricing power remains the dominant story.

The primary catalyst is management's guidance for 2026. The key metric to watch is the volume growth trajectory versus the pricing assumptions baked into current targets. The market consensus, as reflected in the average 1-year price target of $274.60, still expects significant upside. For that to materialize, the company must clearly articulate a path where volume growth accelerates beyond the low- to mid-single-digit range supported by pricing carryover. A guidance statement that merely confirms a slow, pricing-supported ramp would likely be seen as a reset to the lower bar set by recent analyst cuts, potentially triggering a "sell the news" reaction.

The introduction of 2030 strategic targets adds another layer. These long-term goals will signal whether management believes the company can compound earnings through volume-driven growth or if it still views pricing power as a core, sustainable advantage. The targets will be scrutinized for details on automation investment, geographic expansion, and margin improvement, all of which are critical to validating the new growth engine.

A key risk that could challenge the earnings compounding story, even with volume growth, is persistent margin pressure. The company has demonstrated resilience through strategic pricing and cost control, but regional headwinds and one-time issues have contributed to margin volatility. If the February report shows that these pressures are not abating, it would undermine the expectation that volume growth can translate directly into higher profits. The market needs to see a clear bridge from recovering volumes to expanding margins to justify the current valuation.

In short, February 12th is the day the market moves from talking about a reset to seeing its proof. The event will validate or invalidate the core assumption of the 2026 narrative: that volume, not pricing, will be the primary driver of Lincoln Electric's next leg up.