Chart Industries, Inc. GTLS currently seems to be a smart choice for investors seeking exposure in the machinery space. Increased earnings estimates and solid fundamentals are reflective of healthy growth potential of the stock.
With $2.1-billion market capitalization, Chart Industries currently has a Zacks Rank #2 (Buy) and a VGM Score of A. It is headquartered in Ball Ground, GA. It belongs to the Zacks Manufacturing – General Industrial industry, which comes under the ambit of the Zacks Industrial Products sector.
We believe that industrial machinery companies are gaining from infrastructure investments, use of sophisticated technologies in manufacturing process, favorable policy changes in the country, growing use of e-retail, and new construction and remodeling activities. However, slower pace of growth in industrial production might be concerning.
It is worth noting that Chart Industries reported better-than-expected results for second-quarter 2019, wherein earnings surpassed the Zacks Consensus Estimate by 11.48%. The bottom line also grew 41.7% on a year-over-year basis.
Its earnings estimates were increased, reflecting bullish sentiments. Over the past 60 days, the Zacks Consensus Estimate for Chart Industries’ earnings has moved up 0.3% to $3.02 for 2019 and 5.8% to $1.09 for the fourth quarter of 2019.
Chart Industries, Inc. Price and Consensus
Chart Industries, Inc. price-consensus-chart | Chart Industries, Inc. Quote
Below we discussed why investing in Chart Industries will be a smart choice.
Top-Line and Bottom-Line Tailwinds: Chart Industries’ globally diversified business structure is a boon. It has a significant presence in the Americas, Europe and the Asia Pacific. Additionally, the company stands to gain from growth in liquefied natural gas (LNG) activities; rising demand for repair and aftermarket services; increasing exposure in space exploration, next-generation fueling system and food & beverage; and others.
Moreover, the company’s various initiatives — including rationalization of product line, headcount reduction, price increases, improvement in supply chain and facility consolidation/reduction — will help in strengthening margins.
For 2019, the company anticipates gaining from healthy contribution from its LNG projects, including Calcasieu and Golar Gimi. Also, the buyout of Industrial Air-X-Changers (“AXC”) business of Harsco Corporation HSC will be beneficial.
Chart Industries anticipates revenues to be $1.41-$1.46 billion in 2019, up from $1.08 billion generated in 2018. Adjusted earnings are predicted to be $2.85-$3.20, higher than the year-ago figure of $2.02.
Acquisitions: The acquisitive nature of Chart Industries has been boosting growth opportunities. The company completed acquisition of the Industrial Air-X-Changers business of Harsco in July 2019.
The buyout is predicted to help Chart Industries strengthen its businesses in the industrial energy and gas market. It will now have easy access to the compression market and hence, will be able to benefit from heavy demand for air-cooled heat exchangers (required for production and transportation of natural gas and oil).
Further, Chart Industries believes that the buyout will immediately have positive impacts on its gross, operating and earnings before interest, tax, depreciation and amortization margins. In the initial year of the completion, cost synergies of roughly $20 million are anticipated while tax benefits of $90 million are anticipated to be realized in the future.
Capital Expenditure: Chart Industries is committed toward the development of its business, and adding properties and plants to its existing asset base. In the first half of 2019, the company’s capital expenditure totaled $15.1 million. For 2019, it predicts capital expenditure to be $35-$40 million.
Lower Leverage: Usually high debts can be concerning, as it increases financial obligations and adversely impacts profitability. However, the case with Chart Industries is favorable. Exiting second-quarter 2019, the company had long-term debts of $304.7 million, down 42.9% from the balance at the end of 2018.
In addition, its debt profile is better than the industry. Its long-term debt/capital is at 20.3% versus the industry’s 45.3%.
Other Key Picks
Two other top-ranked stocks in the industry are Crawford United Corporation CRAWA and Mitsubishi Heavy Industries, Ltd. MHVYF. Both stocks currently sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Current-year earnings estimates for Crawford United and Mitsubishi Heavy suggest year-over-year growth of 36.2% and 2.6%, respectively.
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