Linde did it again, beating earnings expectations and providing solid, if conservative, guidance. This is why we own companies that produce and supply industrial gases. Regardless of their background, they deliver results every quarter. Revenue for the first quarter ended March 31 rose more than 8% year over year to $8.78 billion, beating the consensus estimate of $8.58 billion from analysts compiled by LSEG. Adjusted earnings per share rose more than 9% year over year to $4.33, beating expectations of $4.26, LSEG said. Linde Why own us: This industrial gas distribution and engineering company has a strong track record of consistent profit growth. Our involvement in a wide range of industries and geographies, including healthcare and electronics, combined with our strong management team’s leadership and disciplined capital management, are the secret to our continued success. Competitors: Air Liquide, Air Products and Chemicals Recent Purchases: Dec. 18, 2024 Started: Feb. 18, 2021 Conclusion “It’s a great set of numbers,” Jim Cramer said Friday on CNBC. “They have helium. They have oxygen. They use a lot of semiconductor gases. So this is like a secret, quiet semiconductor, data center play. I love them.” This accolade is certainly warranted, as Linde’s sales and bottom line growth was driven by year-over-year sales growth in all end markets and key operating regions. And data centers aren’t the only attractive growth opportunities for industrial gas companies. In consumer markets, healthcare sales increased 1%, food and beverage sales increased 5%, and electronics increased 10%. In more cyclical industrial end markets, manufacturing sales rose 5%, with half of the increase coming from U.S. aerospace activity, which primarily supports the production, testing and launch of spacecraft. “This end use continues to show strong double-digit percentage growth,” Chief Financial Officer Matt White said on a conference call with investors. The team plans to separate if aerospace end market sales continue to exceed 5% of global sales. In addition, sales in the Chemicals & Energy and Metals & Mining divisions both increased by 3%. By region, sales increased 10% in the Americas, 11% in Asia Pacific, and 7% in Europe, the Middle East and Africa. Linde is exactly the type of name you want to own when energy prices are trending upward. That’s because, as the company says in its annual report, much of its business is done through long-term contracts, which allow it to pass fluctuations in energy and raw material costs onto customers, resulting in more stable cash flow. LIN 1Y Mountain Linde 1-Year Return Although the company’s operating margin contracted slightly, operating income increased year over year on strong sales growth and beat Street consensus estimates. Furthermore, when it comes to Linde, profit margins tend not to tell the whole story due to the dynamics of ‘cost-passing’. Pass-through costs put pressure on profit margins because the revenue generated from pass-throughs essentially has a 0% profit margin. However, it does not affect the amount you actually receive, which helps protect your earnings. After all, it may not be one of the most exciting names in the world, but it’s certainly one of the most consistent. As a result, we reiterate our 1 rating and raise our price target from $540 to $550. Linde has once again demonstrated that industrial gases can boost profits in any economic environment, thanks to the critical role they play in the supply chains of many industries. Explanation Linde’s Americas sales increased 10% year over year to $4.025 billion, driven by 4% higher prices and mixes and 2% volume growth, primarily due to strong performance in electronics and manufacturing end markets. Asia Pacific (APAC) revenue increased 11% year-over-year to $1.7 billion, driven by 6% increase in project launches and higher equipment sales. In Europe, the Middle East and Africa (EMEA), sales increased 7% year over year, but volumes declined 3% due to weakness in manufacturing, chemical and energy end markets. However, the price and configuration resulted in a 1% profit. Revenues from the Engineering division, which Linde reports as an operating segment along with its regional results, were down 8% year-on-year, lower than expected. However, the company’s factory balance sales increased slightly from the previous quarter as the company pumped $640 million into new projects during the quarter. Guidance Linde raised the midpoint of its full-year outlook, while expecting current earnings to be in line with expectations. Importantly, both the current quarter and full-year guidance assume the economy does not improve. Linde expects adjusted EPS of $4.40 to $4.50 for the second quarter of fiscal 2026, up 8% to 10% year-over-year and a penny better than the interim estimate of $4.44. Full-year 2026 adjusted EPS guidance is $17.60 to $17.90, an increase in the floor from the previous estimate of $17.40 to $17.90. This represents annual growth of 7% to 9%, but is below the consensus estimate of $17.83, according to LSEG. Given management’s conservative tendencies, we’re not worried since we’re only a quarter of the way through this year. We believe the increased guidance is encouraging in this uncertain economic environment. Linde reiterated that the company will make annual capital investments of $5 billion to $5.5 billion to support growth and sustainment. At the midpoint, capital spending assumptions are slightly above FactSet’s estimate of $5.2 billion. (Jim Cramer’s Charitable Trust is a long LIN. See here for a complete list of stocks.) As a subscriber to Jim Cramer’s CNBC Investment Club, you will receive trade alerts before Jim makes a trade. After Jim sends a trade alert, he waits 45 minutes before buying or selling stocks in his charitable trust’s portfolio. If Jim talks about a stock on CNBC TV, he will issue a trade alert and then wait 72 hours before executing the trade. The above investment club information is subject to our Terms of Use and Privacy Policy, along with our disclaimer. No fiduciary duties or obligations exist or arise from your receipt of information provided in connection with the Investment Club. No specific results or benefits are guaranteed.
