ESAB

Bull case

ESAB is attractive because its portfolio is shifting toward higher-margin, higher-quality businesses: pro forma equipment sales rise to about 52% of revenue, while Eddyfi adds roughly $270M of 2026 revenue with about 65% adjusted gross margin, 30% adjusted EBITDA margin, and 55% recurring revenue. The company’s exposure is also becoming more resilient and mission-critical, with stronger ties to nuclear, infrastructure, energy, aerospace and defense, plus a commercial funnel of roughly $450M that could support cross-selling across welding, inspection, and monitoring. Although net debt of about $2.32B and 3.7x leverage create near-term pressure, ESAB’s 19.0% core operating margin, expected 22.2% 2027 adjusted EBITDA margin, and deleveraging toward 2.3x support a constructive long-term fundamental outlook.

Bear case

• ESAB is viewed negatively because 2Q26 results exposed a weak quality of earnings profile: core adjusted EPS of $1.35 missed consensus despite an $807.6 million revenue beat, and core adjusted EBITDA margin still fell 90 bps to 19.5% as pricing stayed roughly neutral against logistics, commodity, and growth-investment costs.
• The outlook is further pressured by FY26 core adjusted EPS guidance of $5.40-$5.50, which fell short of the $5.69 consensus and the prior ex-Eddyfi range, while Eddyfi financing increased interest expense, added dilution, and left the promised revenue synergies and earnings accretion still ahead rather than visible.
• On top of that, net debt of about $2.32 billion, or roughly 3.7x FY26 adjusted EBITDA, plus ongoing Middle East and Russia exposure create a heavier risk profile and a durable valuation discount until leverage and operating consistency improve.