Walt Liptak

Walt Liptak asked about the expected Q1 seasonality for earnings and production schedules. He also inquired about potential increases in cost synergies for New Way, specifically regarding 80/20 opportunities, and the rationale behind adding a fourth printed circuit board (PCB) line at the University Park facility.

Answer

Jennifer Sherman, President and CEO, stated that the earnings cadence for Q1 is expected to be similar to past patterns (19%-20% of full-year earnings), though order seasonality might change due to New Way, Hogg, and Mega. She confirmed that 80/20 and operational optimization are critical to achieving the $15 million-$20 million in synergies for New Way by 2028, with half being cost-related, and mentioned transferring an 80/20 expert to the New Way team. Regarding the fourth PCB line, she explained it drives continued growth, accelerates new product development, and addresses customer needs in both police and signaling businesses.

Walt Liptak with Seaport Research Partners asked about the expected Q1 seasonality for earnings and production schedules. He also inquired about the potential for increased cost synergies for New Way, specifically regarding 80/20 initiatives, after a full financial and operational review. Finally, he asked about the drivers for adding a fourth PCB line at the University Park facility.

Answer

Jennifer Sherman, President and CEO, stated that the earnings cadence for Q1 is expected to be similar to past patterns (19%-20% of full-year earnings), though New Way, Hogg, and Mega could alter order seasonality. She confirmed the $15 million-$20 million synergy target for New Way by 2028 (half cost, half revenue), emphasizing 80/20 as a critical synergy, with an experienced 80/20 leader now working with the New Way team. Regarding the PCB line, she explained it accelerates new product development, addresses customer needs in police and signaling, and facilitates additional growth opportunities.

Walt Liptak inquired about the impact of the January PMI on Lincoln Electric's general industrial consumables or equipment, asking if there was a noticeable 'pop' in sales. He also asked about the fundamental differences in approach between the 2030 RISE targets and the previous 2025 Higher Standard strategy, and how Lincoln Electric has evolved structurally.

Answer

Steven Hedlund, Chairman and CEO, stated that Lincoln Electric would lag any PMI improvement, and while consumable volume has been steady, there hasn't been an inflection. Gabriel Bruno, CFO, reiterated the steadiness in consumable volume, awaiting an escalation in capital investment. Mr. Hedlund views the RISE strategy as a continuation and evolution of the Higher Standard strategy, building on past momentum despite a volatile market environment. He emphasized that optimism is driven by team accomplishments and opportunities, with caution around external factors.

Walt Liptak asked if Lincoln Electric saw a pop in January with general industrial consumables or equipment, referencing the PMI. He also inquired about the differences in approaching the 2030 RISE targets versus the 2025 Higher Standard strategy, and how Lincoln Electric has structurally evolved.

Answer

Steven Hedlund, Chairman and CEO, stated that Lincoln Electric would lag any PMI improvement and hasn't seen an inflection in consumable volume, though it has been steady. Gabriel Bruno, CFO, emphasized the need for escalation in capital investment. Hedlund viewed the RISE strategy as a continuation and evolution of the Higher Standard strategy, building on momentum despite external headwinds, rather than a radical departure.

Walt Liptak sought clarification on the 'mix and construction being weaker' comment, specifically if it referred to ClarkDietrich and the nature of the mix impact. He also asked about the seasonality of ClarkDietrich's performance and whether a lift is expected in the back half of the year, and if there's a tougher comp for smaller gas containers in Q3 due to strong performance last year and recent cold weather.

Answer

CFO Colin Souza clarified that the subdued construction comment primarily referred to ClarkDietrich's new construction exposure and intense competition. President & CEO Joseph Hayek added that ClarkDietrich's mix shifted towards larger, lower-margin projects (stadiums, infrastructure) compared to traditional drywall stud business. Souza stated that ClarkDietrich's seasonality is not too pronounced, expecting no worse than sequentially flat performance, with earnings impacted by steel pricing and project mix. Hayek explained that Q3 and Q4 are seasonally strongest for small gas containers due to winter heating needs and spring construction, and he doesn't foresee significant differences in seasonality this year compared to last year's strong Q3.

Walt Liptak asked for clarification on the HVAC refrigerant container business, specifically whether its recent success represents a one-year bump or a sustained increase in penetration and market growth. He also inquired about the expected seasonality for Worthington's business through the fall, winter, and into the spring selling season, including inventory lifts and indications from large customers in both consumer and building products.

Answer

CEO Joe Hayek indicated that the HVAC refrigerant container business is likely experiencing sustained penetration and market growth, driven by ongoing mandates for environmentally friendly gases, rather than a temporary bump. CFO Colin Souza explained that Q1 and Q2 are typically seasonally weaker than Q3 and Q4, with specific activity in Q2 and Q3 often influenced by unpredictable weather events like colder temperatures or storms.

Walt Liptak, MD and Senior Equity Analyst at Seaport Global Securities, inquired about IDEX's organic revenue outlook for 2026, asking whether the company feels cautious or optimistic, especially given its growth platforms. He also sought guidance on the operating leverage to consider when modeling 2026 EPS.

Answer

Akhil Mahendra, Interim CFO, stated that specific 2026 guidance would be provided later, but highlighted ongoing monitoring of day rates, pricing dynamics, and momentum in growth platforms. He indicated that consolidated incrementals for 2026 should be thought of as 30% plus, with HST potentially higher. Eric Ashleman, President and CEO, added that the degree of market buoyancy would significantly impact incrementals, with better performance expected if organic growth reaches 3-4% rather than remaining flat.

Walt Liptak from Seaport Global Securities asked for management's sentiment on the 2026 organic revenue outlook (cautious vs. optimistic), especially considering the growth platforms. He also requested guidance on the expected operating leverage for modeling 2026 EPS.

Answer

Akhil Mahendra, Interim CFO, stated that IDEX is still monitoring day rates and working on 2026 guidance, considering pricing dynamics, growth platform momentum, and the macro backdrop. He advised thinking of consolidated incrementals at 30% plus, with some segments potentially higher, for modeling 2026 EPS. Eric Ashleman, President and CEO, added that the degree of market buoyancy matters, with incrementals performing better if organic growth reaches 3-4% rather than remaining flattish.