Earnings Release: Chart Industries Reports Strong Q3 Financials, Aiming for Growth

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Earnings Release: Chart Industries Reports Strong Q3 Financials, Aiming for Growth

Chart Industries, Inc. (NYSE: GTLS) demonstrated strong financial performance in the third quarter of 2024; significant growth in sales and a notable decrease in net leverage. CEO Jill Evanko and CFO Joe Brinkman presented the company's third-quarter results on November 1, 2024, highlighting a 22.4% increase in sales compared to the same period last year, with net cash generated from operating activities amounting to $200.7 million.

Key Highlights:

  • Chart Industries' third-quarter sales reached $1.06 billion, reflecting a 22.4% year-over-year increase.
  • Net cash from operating activities was $200.7 million, providing $174.6 million in free cash flow.
  • The net leverage ratio improved to 3.04x, with a target to further reduce it to between 2x and 2.5x.
  • Adjusted EBITDA was $260.7 million, or 24.5% of sales, with adjusted earnings per share at $2.18.
  • Orders in the third quarter totaled $1.17 billion, representing a 5.4% increase year-over-year, supported by rising demand from the energy and hydrogen sectors.
  • The company reported a $23 billion commercial pipeline and $1.95 billion in customer commitments not yet in the order book.

Company Outlook: Full-year sales for 2024 are projected to be between $4.2 billion and $4.3 billion. Adjusted EBITDA is expected to fall between $1.015 billion and $1.045 billion. Adjusted diluted earnings per share are anticipated to be approximately $9, with free cash flow expected to reach $400 million. For 2025, sales are expected to range between $4.65 billion and $4.85 billion, with adjusted EBITDA between $1.175 billion and $1.225 billion, and adjusted diluted earnings per share expected to be between $12 and $13.

Negative Aspects:

  • Orders in the Special Products segment declined by 49% year-over-year due to timing, falling to $237.8 million.
  • The gross profit margin for Special Products fell sequentially to approximately 26%.

Positive Aspects:

  • Record HTS sales of $256.2 million, marking a 12.5% year-over-year increase.
  • HTS gross profit margin increased to 29.8%, representing a 340-basis point improvement compared to the third quarter of 2023.
  • Orders in the RSL segment rose by 16.5% to $377.9 million, with sales increasing by 36% year-over-year.

Underperforming Areas:

  • The gross profit margin for the Special Products segment fell sequentially due to new facility expenses.

Q&A Highlights: CEO Jill Evanko discussed the $23 billion pipeline and $2 billion in commitments, focusing on HTS and special commitments. She indicated an expectation of a 1.5 million sales increase from the third to the fourth quarter, with order/sales ratios of 1 or higher. Concerns about potential revenue risks from policy changes in Washington were dismissed.

Chart Industries' focus on strong operational improvements and efficiencies has contributed to a robust financial outlook. The company's partnerships and projects in LNG and hydrogen sectors with firms like ExxonMobil and Renergy Group highlight its commitment to growth across various industries. Despite a decline in Special Products segment orders due to timing, record HTS sales and improving gross profit margins indicate a positive trajectory. The expectation for continued strong demand in the majority of the end markets, especially with the acceptance of IPSMR technology, suggests that the company is well-positioned for future growth. Investor Day on November 12, 2024, will provide further insights into Chart Industries' strategic direction and financial objectives.

InvestingPro Forecasts: Chart Industries' strong performance in the third quarter of 2024 is also supported by InvestingPro data. The company's 46.41% revenue growth over the last twelve months aligns with the reported 22.4% sales increase in the third quarter. This robust growth is complemented by an impressive 81.95% EBITDA growth during the same period, highlighting its capability to efficiently expand operations.

InvestingPro Insights emphasize that Chart Industries possesses a perfect Piotroski Score of 9, indicating strong financial health and operational efficiency. This score aligns well with the company's reports of improvements in net leverage and strong cash flow generation. Additionally, indications of net income growth this year support a positive outlook for 2024 and 2025.

The company's adjusted P/E ratio of 26.77 over the last twelve months, in conjunction with the InvestingPro Insight that it trades at a low P/E ratio relative to near-term earnings growth, suggests that the stock might be undervalued considering its growth expectations. This could be particularly appealing to investors given the anticipated earnings growth and sales expansion.

It is important to note that InvestingPro has offered 11 additional insights concerning Chart Industries, providing a more comprehensive analysis for investors seeking deeper information on the company's financial health and market position.