- 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 nine months 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. In Q3 2026, the margin rose to 19.8%, but ESAB cut the outlook again, to $5.28 to $5.33, and it now expects core organic growth of only 1.6% to 2.0% in 2026. Total debt was $2.35 billion at October 2, 2026, against $1.24 billion at the end of 2025. For the gap to close, core organic sales must grow by 2% or more, the margin must keep rising 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 Q3 2026 report on November 4, 2026 failed the first test because of the lower outlook. 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 after the Eddyfi purchase, to $2.35 billion at October 2, 2026. 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 nine months of 2026, and about $51 million of its cash is there. 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: $189M
Debt: $2.3B
Net debt: $2.2B
Interest cover: 2.8×
Undrawn credit line: $760M, to October 2030
Debt due within 12 months: $9.0M
Last debt due: 2031
At October 2, 2026, ESAB had $189 million of cash and $2.35 billion of debt: $700 million of 6.25% senior notes due April 2029, $1.0 billion of 5.625% senior notes due April 2031, a $350 million term loan, $290 million drawn on its $1.05 billion revolving credit facility and $7 million of other debt. The term loan and the revolving facility mature in October 2030. Debt was $2.42 billion at July 3, 2026, and $1.24 billion at December 31, 2025, before the Eddyfi purchase. About $51 million of the cash at October 2, 2026 was in Russia, and it can be slow to move out. The weighted average interest rate on borrowings was 5.40%, including cross-currency swaps. Interest cover is operating income divided by interest expense and other, net, for the first nine months of 2026. Adjusted free cash flow was $141 million in the first nine months of 2026, against $163 million a year earlier. 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 $760 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 Oct 2, 2026.
- Checkpoints
- Nov 4, 2026: Q3 2026 results: organic growth and margins. Failed. 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. Outcome: Core organic growth of 2.3% and a margin of 19.8% passed, but ESAB cut its 2026 core adjusted EPS outlook to $5.28 to $5.33 and its core organic growth outlook to 1.6% to 2.0%.
Feb 4, 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
- Nov 4, 2026: ESAB reported Q3 2026 results. Sales were a record $825 million, up 13.3%, and core organic sales grew 2.3%, with growth in both segments. GAAP EPS from continuing operations was $0.61, and core adjusted EPS was $1.30, down from $1.32. Core adjusted EBITDA rose 17.0% to $156 million, and its margin rose 40 basis points to 19.8%. ESAB cut its 2026 outlook for core organic growth to 1.6% to 2.0%, for core adjusted EBITDA to $603 million to $607 million and for core adjusted EPS to $5.28 to $5.33. Total debt fell to $2.35 billion from $2.42 billion at July 3, 2026.
Aug 6, 2026: 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.
Jun 10, 2026: 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.
Jun 1, 2026: 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.
May 7, 2026: 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.