- Price
- $65.63
- Fair value
- $121.00
- Discount
- 45.8%
- Uncertainty
- Medium
- LSEG rating
- 1.55
- Moat
- Narrow
- Next earnings
- 2026-11-06
- Next earnings is estimate
- Yes
- Company name
- ESAB
- Sector
- Industrial machinery
- About
- ESAB makes welding and cutting equipment, the consumables that these machines use, gas control equipment, automation and robotics, and software. Customers use these products to make, control, inspect and monitor critical products and infrastructure. Consumables are used up in the work, so customers buy them again and again. ESAB reports two segments: the Americas, and EMEA & APAC, which includes Europe, the Middle East, India, Africa and Asia Pacific. On June 1, 2026, it bought Eddyfi Technologies, a Canadian maker of inspection and monitoring instruments, for $1.45 billion in cash. ESAB sells in about 150 countries, and Russia gave about 5% of its sales in the first half of 2026. Mitchell Rales, who has four decades of experience in building industrial companies, is Executive Chair of the Board.
- Thesis
- ESAB trades at a discount because the market doubts that it can grow while its main markets are weak, and because it took on more debt to buy Eddyfi. Core organic sales fell 1% in Q1 2026 and grew only 2.5% in Q2 2026. The war in Iran and the closing of the Strait of Hormuz cut sales in the Middle East and raised logistics and material costs. Core adjusted EBITDA margin fell to 19.5% in Q2 2026, and the 2026 core adjusted EPS outlook fell to $5.40 to $5.50 from $5.70 to $5.90, because the Eddyfi debt and new shares cost more than Eddyfi earns in its first year. Total debt rose to $2.4 billion at July 3, 2026, from $1.2 billion at the end of 2025. For the gap to close, core organic sales must grow inside the 2% to 4% range, the margin must recover as price increases offset the higher costs, Eddyfi must add growth at a higher margin as planned, and ESAB must reduce its debt from cash flow. The first test is the Q3 2026 report, expected in early November 2026. The 2027 outlook, due in February 2027, will show the first full year with Eddyfi. If margins recover and debt falls, the gap can close over the next four to six quarters. The main risk is a longer conflict in the Middle East or a weaker industrial economy that keeps volumes down.
- Risks
- The war in Iran and the closing of the Strait of Hormuz cut ESAB's sales volume in the Middle East and raised logistics and commodity costs in 2026. If the conflict lasts longer, sales and margins in EMEA & APAC can stay under pressure.
Debt almost doubled to $2.4 billion at July 3, 2026, after the Eddyfi purchase. Interest costs rose, and the new preferred stock pays 6.50% a year and converts into common shares in about three years. If Eddyfi grows less than planned, the deal can lower earnings per share for longer.
Welding demand follows industrial production, construction, shipbuilding and energy projects. Tariffs in the Americas reduced sales volume in the first half of 2026. A weaker industrial economy can cut volumes further.
ESAB still sells in Russia, which gave about 5% of sales in the first half of 2026. New sanctions can force it to stop this business.
Some subsidiaries are defendants in many asbestos lawsuits about old products. ESAB records a liability for the next 15 years of claims and holds insurance assets against it, but the cost of claims can change.
- Balance sheet
- Cash: $217M
Debt: $2.4B
Net debt: $2.2B
Interest cover: 3.0×
Undrawn credit line: $690M, to October 2030
Debt due within 12 months: $6.0M
Last debt due: 2031
At July 3, 2026, ESAB had $217 million of cash and $2.42 billion of debt: $700 million of 6.25% senior notes due April 2029, $1.0 billion of 5.625% senior notes due 2031, a $350 million term loan and $360 million drawn on its $1.05 billion revolving credit facility. The term loan and the revolving facility mature in October 2030. Debt was $1.24 billion at December 31, 2025, before the Eddyfi purchase. The weighted average interest rate on borrowings was 5.39%, including cross-currency swaps. Interest cover is operating income divided by interest expense and other, net, for the first half of 2026. The $175 million of 6.50% mandatory convertible preferred stock is equity and is not included in debt. ESAB was in compliance with its covenants, and it had $690 million available on its revolving facility. It has not bought back shares under its 2024 buyback program. The company does not state its credit ratings in the 10-Q.
As of 2026-07-03.
- Checkpoints
- Nov 6, 2026 (estimate): Q3 2026 results: organic growth and margins. Pending. Watch: Core organic growth inside the 2% to 4% range, a higher core adjusted EBITDA margin than in Q2 and the 2026 outlook kept pass; another outlook cut or falling volumes fail.
Feb 2027 (estimate): Full-year 2026 results and 2027 outlook. Pending. Watch: A 2027 outlook with core adjusted EPS growth, Eddyfi growth at a higher margin and lower debt passes; flat earnings or debt that does not fall fails.
- Recent events
- 2026-08-06: ESAB reported Q2 2026 results. Sales were a record $808 million, up 12.9%, and core organic sales grew 2.5%. GAAP EPS from continuing operations was $0.54, and core adjusted EPS was $1.33, down 1%. Core adjusted EBITDA rose 8.0% to $150 million, but its margin fell 90 basis points to 19.5%. ESAB raised its 2026 core adjusted EBITDA outlook to $615 million to $625 million with Eddyfi, and it set core adjusted EPS at $5.40 to $5.50.
2026-06-10: Mitchell Rales became Executive Chair of the Board. ESAB gave performance-based stock options with stock price targets to him, to CEO Shyam Kambeyanda and to other senior managers, with long vesting periods.
2026-06-01: ESAB completed the purchase of Eddyfi Technologies for $1.45 billion in cash, one month ahead of plan. It paid with cash, its $1.0 billion of 5.625% notes due 2031, a draw on its revolving credit facility, $175 million of 6.50% mandatory convertible preferred stock and $143 million of new common stock.
2026-05-07: ESAB reported Q1 2026 results. Sales were a record $746 million, up 10%, but core organic sales fell 1%. Core adjusted EPS was $1.31, up 5%. The core adjusted EBITDA margin fell 80 basis points to 19.0%, partly from costs related to the conflict in Iran. R. Brent Jones, formerly CFO of Avantor, became CFO in May 2026.