ESAB Cuts 2026 Profit Outlook Despite Q3 Sales Growth

ESAB Corporation reported higher third-quarter core sales and adjusted EBITDA, supported by acquisitions, pricing and organic growth in both operating segments. However, the fabrication technology company reduced several full-year targets, including core organic growth, adjusted EBITDA, adjusted earnings per share and free-cash-flow conversion, while citing inflationary pressure and weakness in South America and the Middle East.

For the quarter ended Oct. 2, 2026, core sales rose 14.5% to $786.8 million from $687.4 million a year earlier. Acquisitions contributed 11.3 percentage points to growth, while organic sales increased 2.3% and foreign-exchange translation added 0.9%. Pricing rose 2.5%, offsetting a 0.2% decline in volume.

Core adjusted EBITDA increased 17% to $156.1 million, with the margin expanding 40 basis points to 19.8%. Core adjusted gross profit climbed to $316.3 million from $258.8 million, and the corresponding margin widened to 40.2% from 37.7%. ESAB attributed the margin performance in part to its EBXai operating system and said price and cost were neutral during the quarter.

On a GAAP basis, total net sales, including Russia, were $824.5 million. Net income from continuing operations fell to $42.2 million from $65.3 million, while diluted earnings per share from continuing operations declined to $0.61 from $1.04. Core adjusted net income increased to $83 million from $80.5 million, but core adjusted diluted EPS slipped to $1.30 from $1.32.

Regional growth led by Europe, Asia-Pacific and North America

Americas sales rose 15.2% to $337.4 million, including 0.8% organic growth and an 11.7% acquisition contribution. Pricing increased 2.7%, while volume fell 1.9%. Adjusted EBITDA grew 17.3% to $67.2 million, and the margin increased 30 basis points to 19.9%.

ESAB said the Americas’ organic growth was driven by high-single-digit growth in the U.S. and Canada. North American equipment sales increased at a low-double-digit rate, while gas-control sales rose by double digits. Results elsewhere in the region were affected by an earthquake in Colombia and elections in Brazil, while Mexico was flat sequentially. Management expects sequential improvement in South America during the fourth quarter.

Core EMEA and Asia-Pacific sales increased 13.9% to $449.5 million, including organic growth of 3.4% and a 10.9% acquisition benefit. Volume rose 1.1% and pricing added 2.3%, partly offset by a 0.5% foreign-exchange headwind. Core adjusted EBITDA advanced 16.8% to $88.9 million, with the margin expanding 50 basis points to 19.8%.

Europe recorded low-single-digit organic growth, while Asia-Pacific grew at a low-double-digit rate. Gas-control equipment sales increased at a mid-single-digit pace. The broader geographic presentation showed continued weakness in the Middle East, despite sequential improvement during the quarter.

ESAB said its Eddyfi and EWM businesses continued to gain traction and that integration remained on track. The company also highlighted a cross-selling opportunity funnel of about $465 million across energy, infrastructure, nuclear, rail, aerospace and other end markets. The funnel represents potential opportunities rather than recognized sales.

Full-year outlook reduced

ESAB now expects 2026 core sales of $3.055 billion to $3.060 billion, compared with its previous range of $3.0 billion to $3.1 billion. The forecast assumes an acquisition contribution of about 9.5%, including seven months of Eddyfi, and an approximately 2% foreign-exchange tailwind.

The company lowered its core organic growth forecast to 1.6% to 2.0% from 2% to 4%. Adjusted EBITDA is now projected at $603 million to $607 million, down from the prior $615 million to $625 million range, while adjusted EPS is expected to be $5.28 to $5.33 rather than $5.40 to $5.50. Adjusted free-cash-flow conversion is forecast at about 80%, compared with the previous expectation of roughly 90%. GAAP free cash flow is expected to equal about 105% of net income.

Management said it expects continued organic growth and margin expansion into the fourth quarter while continuing targeted investments in growth initiatives, productivity and artificial intelligence. The company also noted that inflationary pressure remains a factor.

GAAP operating cash flow was $72.7 million in the quarter, down from $81.5 million a year earlier, while adjusted free cash flow declined to $60 million from $86.4 million. ESAB said free cash flow was affected by interest expense, including $38 million of cash interest payments during the quarter. Adjusted net leverage stood at 3.4 times, including Eddyfi on a pro forma basis. Management expects leverage to move into the low-three-times range in the fourth quarter and to the mid-two-times range by the end of 2027.

The company identified inflation, tariffs and trade policy, foreign-exchange and commodity-price fluctuations, supply-chain disruption, customer creditworthiness and geopolitical conflicts as material uncertainties. Its outlook is also subject to broader economic conditions and the company’s ability to integrate acquisitions and execute its operating plans.