Why Chart Industries Gained 22.4% in February

stock chart industry (GTLS -0.63%) It rose 22.4% in the month of February, according to data from S&P Global Market Intelligence.

The manufacturer of industrial gas and liquid tanks, heat exchangers, and rotating fans released its fourth-quarter earnings report on February 28. The headline results were somewhat different from analysts’ expectations, but the stock had already begun to decline on February 28th. Following the Biden administration’s announcement on the construction of future LNG terminals.

But the company’s record results and strong guidance seemed to allay those fears, sending this cheap value stock higher.

Chart Score History Orders and Balance

During the quarter, Chart recorded its first billion-dollar quarter ever, with revenue of $1.02 billion and adjusted (non-GAAP) earnings per share (EPS) of $2.25. While these profit numbers beat expectations, revenue was actually slightly lower than analysts predicted.

However, the headline revenue in the chart may be affected by when revenue is recognized. Because we are involved in the supply of these large-scale projects, there may be times when revenue recognition is delayed due to project or supplier delays, which are common in large-scale industrial projects.

Investors should probably pay more attention to orders, which came in at $1.21 billion, 20% higher than headline revenue, 7% quarter-over-quarter, and 28% year-over-year. The company also guided for 2024 adjusted EPS of $12 to $14, which is more than 100% higher than the $6.09 recorded in 2023.

For a stock priced at $140, this is a very cheap valuation. This is especially true for companies that are growing like charts. Management reaffirmed its previous goals for annual revenue growth in the mid-teens and EPS growth in the mid-40s over the next three years.

This full-year guidance is actually slightly lower than the $14+ suggested at the company’s November 2023 investment date, but investors will likely have breathed a sigh of relief anyway. Stocks fell toward the end of January after the Biden administration announced it would suspend approvals for new U.S. LNG terminals pending further evaluation of their economic and environmental impacts.

But the chart does little to predict the impact of the new legislation because existing projects that are actually under construction are still under construction and the revenue from the chart varies widely across LNG companies, not just in the U.S. but around the world. Your customers will likely fill that void.

Additionally, the chart only mentioned the ‘customer timing and supply chain’ factor in its slightly lower guidance. Given that Chart has experienced some project delays over the past few quarters, this is likely conservative and does not actually mean a loss of revenue, but simply a delay in revenue recognition and related profits.

Image source: Getty Images.

The chart is a compelling energy transition and utilization reduction story.

Chart’s stock price plummeted after announcing the debt-funded Howden acquisition in November 2022 and closing in March 2023. However, by all appearances, the integration is progressing smoothly and Chart is targeting full-year cost and revenue synergy targets with good margins.

The combined company, now able to offer more complete solutions across tanks and heat exchangers from Chart and industrial fans from Howden, appears to be far better than the previous two parts combined.

Chart also applies to many other industries beyond LNG, including hydrogen, water purification, helium, carbon capture, clean mining, and other energy transition markets in addition to oil and gas. Still 40% below the 2022 high, the chart appears to be one of the cheapest ways to undertake a clean energy transition, even after the February surge.