Mig Dobre

Mig Dobre asked for a detailed bridge of the 2026 EBITDA guidance, specifically inquiring about the incremental contributions from cost synergies, revenue synergies, and the five-month carryover from the H&E acquisition.

Answer

Mark Humphrey (SVP and CFO) clarified that the EBITDA increase includes approximately $125 million from cost synergies, $60-$70 million from revenue synergies (based on a 60-70% flow-through rate from $100-$120 million in revenue synergies), and the remaining portion from the GAAP contribution of H&E for the initial five months of 2026.

Mig Dobre of Baird inquired about the bridge for the projected $235 million increase in 2026 EBITDA, specifically asking about contributions from incremental cost savings, revenue synergies, and the carryover from the H&E acquisition.

Answer

Mark Humphrey, SVP and CFO, explained that the increase is primarily driven by $125 million in cost synergies and $60 million-$70 million from revenue synergies, with additional EBITDA contribution from H&E on a GAAP basis for the first five months of 2026.

Mig Dobre inquired about Lincoln Electric's 2026 pricing assumptions, specifically if they exclude metal inflation in Harris Products Group and if a general 2026 price increase is anticipated. He also asked about the opportunity to drive higher margins in the automation business, given its current dilutive nature, and if 'techquisitions' could be accretive to margins.

Answer

Gabriel Bruno, CFO, confirmed that pricing actions would be taken as conditions require to maintain a neutral price-cost strategy. For Harris, a mechanical adder handles metal costs, which is not dilutive to the segment's overall margin. Steven Hedlund, Chairman and CEO, acknowledged automation is currently dilutive but strategically important, aiming to make it non-dilutive first, then accretive. He noted that tech acquisitions like Inrotech, offering differentiated capabilities, are expected to be accretive. Mr. Bruno added that automation achieved a low-teens EBIT profile at $940 million sales in 2023 and targets mid-teens, confident in achieving this despite recent capital investment pressure.

Mig Dobre asked about the near-term pricing strategy for 2026, specifically regarding metal inflation in the Harris Products Group and its impact on EBIT or margin, and whether new 2026 price increases are anticipated beyond the 2025 carryover. He also questioned the longer-term opportunity for higher margins in the automation business, given its current dilutive nature, and if 'techquisitions' could be accretive to margins.

Answer

Gabriel Bruno, CFO, explained that pricing actions will be taken as conditions require to maintain a neutral price-cost strategy, and Harris's mechanical adder for metal costs is not dilutive to its margin. Steven Hedlund, Chairman and CEO, stated the goal for automation is to first become non-dilutive, then accretive, leveraging differentiated tech acquisitions like Inrotech. Bruno added that automation achieved a low-teens EBIT profile at $940 million sales and targets mid-teens by 2030.

Mig Dobre sought specific year-over-year revenue decline and margin expectations for the Access segment in Q1 2026. Dobre also questioned the visibility for the full-year Access revenue guide of $4.2 billion, given the Q4 2025 order intake, and asked when Oshkosh anticipates reaching a $300 million quarterly revenue run rate for the Next Generation Delivery Vehicle (NGDV) program.

Answer

CFO Matt Field stated that the Q1 2026 Access revenue decline year-over-year is expected to be higher than the full-year guide of 6-7% due to strong Q4 2025 sales from pricing actions. CEO John Pfeifer explained that the $1.3 billion Access backlog, representing 3-6 months of demand, supports the $4.2 billion full-year guide, with the first half under pressure but showing consistent progress. Pfeifer confirmed NGDV production is at or ahead of USPS requirements, with 2026 units at the low end of the 16,000-20,000 annual range, and NGDV revenue comprising about half of the Transport business guide.

Mig Dobre requested specific year-over-year revenue decline and margin expectations for the Access segment in Q1. He also questioned the visibility for the implied improvement in the full-year Access guide of $4.2 billion, and when the NGDV program is expected to reach its full run rate of $300 million quarterly revenue.

Answer

EVP and CFO Matt Field stated that the Q1 Access revenue decline year-over-year is expected to be higher than the full-year guide due to Q4 sales pull-forward. President and CEO John Pfeifer noted that the $1.3 billion backlog, representing three to six months of demand, supports the full-year Access guide. For NGDV, John Pfeifer confirmed they are at or ahead of USPS delivery requirements, with 2026 production at the low end of the 16,000-20,000 unit range, and about half of the Transport segment's revenue for 2026 will be from NGDV.

Mig Dobre from Baird asked about the outlook for the European segment in fiscal 2027, particularly concerning the dissipation of EU subvention funds in Romania and broader regional trends. He also questioned the potential for further stimulus packages in Europe and the outlook for the North American business in fiscal 2027, including expected declines and equipment margins. Finally, he sought clarification on inventory levels in terms of unit counts, considering price increases and store count changes.

Answer

CFO Bo Larsen stated that Romania's revenue doubled year-over-year due to funds, but a 30-40% pullback is expected for fiscal 2027, with some prescriptive funds continuing through 2027. He projected a high-teens to 20% year-over-year decline for Europe ex-Germany. For North American margins, Bo Larsen indicated that domestic ag equipment margins improved to 6.5% in the second half of the current fiscal year (5.25% excluding incentives), which could be a proxy for early fiscal 2027. President and CEO Bryan Knutson discussed ongoing footprint optimization and multi-brand strategy with CNH, and highlighted commodity prices and government stimulus as key variables for 2026 demand. On inventory, Bo Larsen explained that while dollar values are up due to price increases, unit counts are significantly better than prior downturns, with aged used equipment being a key focus for reduction. Bryan Knutson emphasized monitoring inventory turns and interest expense as better indicators than pure dollar value.

Mig Dobre asked about the Europe segment's performance, particularly the dissipation of stimulus in Romania, and sought an outlook for fiscal 2027. He also questioned the US business outlook for fiscal 2027, asking if another year of decline is expected and how equipment margins would fare with volume compression. Additionally, he inquired about inventory levels in terms of unit counts relative to prior cycles.

Answer

Bo Larsen, CFO, indicated that Romania's business doubled year-over-year but expects a 30-40% pullback in fiscal 2027, with Europe ex-Germany potentially down high teens to 20%. He noted that domestic ag equipment margins improved significantly in the second half of fiscal 2026, suggesting a 5.25% proxy for early fiscal 2027. Bryan Knutson, President and CEO, discussed ongoing footprint optimization, multi-brand strategy, and the challenging outlook for growers in fiscal 2027 due to commodity prices and government assistance. Both executives emphasized managing inventory by turns and interest expense, aiming for leaner inventories.