Industrial gas and engineering giant Linde on Thursday delivered a solid quarter in a tough economic environment, capitalizing on its ability to raise prices and drive productivity gains. Revenue for the first quarter ended March 31 was flat compared to the year-ago period, coming in at $8.11 billion, which missed the LSEG compiled analysts’ consensus estimate of $8.24 billion. Adjusted earnings per share rose 5.3% year over year to $3.95, which exceeded the $3.93 expected and extended Linde’s streak of EPS beats to 25 straight quarters. LIN YTD mountain Linde YTD Linde said two-thirds of its sales are defensive and not tied to economic trends, which explains why the stock has been resilient so far this year. While modestly lower Thursday, shares have gained more than 7% in what has been a shaky 2025 for the overall market. The S & P 500 has lost 4% year to date. Still, Linde’s mixed forward guidance assumed economic deterioration due to uncertainty about global tariffs. So, we’re reiterating our 2 rating and a price target of $500. Management, which is known for under-promising and over-delivering, is not predicting a recession. “This is not our economic call per se. It’s just the placeholder taking kind of the current situation and extrapolating it out,” CFO Matt White said. This keeps expectations in check for the rest of the year. Should the economy stabilize or improve, Linde’s outlook will prove to be conservative. Ahead of the quarter, we booked some profits in Linde. In last week’s trade alert, we said we thought the company would beat on EPS, which it did, but wanted to be cautious after chemical giant Dow announced a delay in its big Canada project that Linde is a partner on. During Linde’s post-earnings conference call, CEO Sanjiv Lamba said the company has built-in contraction protections for such delays. So, at this point, this is not being viewed as a big deal. Bottom line Linde’s quarter, outlook, and commentary can be summed up in one word: steady. And, in the chaos of high tariff rates and a lack of transparency in trade policy, that is no small feat. “The rapid changes in global trade policy are having a dampening effect on overall industrial activity. So I’d anticipate more volatility in end market trends until there is greater clarity and stability,” Lamba said on the call. Linde’s quarterly revenue miss and slight EPS beat were expected, but we were pleased to see companywide operating margins continue to improve. Linde, which supplies all types of industrial gases to end-markets including manufacturing, electronics, and energy, attributed its strong margins to price durability and achieving productivity gains. In fact, on the call, Lamba said, “A third, well about 30%, 31%, 32%, of our all our productivity efforts come out of digital and AI solutions.” He added, “We have 105 use cases on AI models that we are deploying as we speak.” Linde Why we own it: The industrial gas supplier and engineering firm has a stellar track record of consistent earnings growth. Its exposure to a wide range of industries, such as health care and electronics, and geographies — paired with excellent executive leadership and disciplined capital management — has been a recipe for steady success that should continue. Competitors: Air Liquid and Air Products Most recent buy : Dec. 18, 2024 Initiated : Feb. 18, 2021 Linde exited the quarter with a project backlog of $10.3 billion. The backlog represents potential future revenue from contract commitments. On the call, Lamba said, “Despite the uncertainty, I expect we will continue to announce new wins in the quarters ahead.” On Tuesday the company announced it will increase its supply of specialty gases to one of Samsung’s semiconductor manufacturing complexes in South Korea. India was also described as a “bright spot” by the CEO. During the quarter, Linde also returned $1.81 billion to shareholders through dividends and stock buybacks. At current share prices, the stock has an annual dividend yield of roughly 1.3%. The capital returns reflect Linde’s strong balance sheet. Commentary While there was plenty to like about the quarter, it was not perfect. Revenue benefited from an overall 2% increase in prices, but it was partially offset by a 1% drop in volumes, mostly due to sluggish growth in manufacturing and metals and mining. Those end markets accounted for 21% and 13%, respectively, of total sales. Adjusted operating profit rose 4% to a better-than-expected $2.44 billion, supported by higher prices and programs to maximize productivity across all segments. That led to a solid 120 basis points, or 1.2 percentage points, increase in an adjusted operating margin of 30.1%. Linde is a price maker and tends to do better during periods of higher inflation. The company views globally weighted CPI as a good proxy for its pricing. However, operating cash flow and free cash flow missed, and capital expenditures were 21% higher than the year-ago period and were above expectations. On the conference call, management did point out that base capex, which excludes backlog investment commitments, actually declined year over year. Sales for Linde’s Americas segment rose 3% year over year to $3.67 billion, driven by 3% higher pricing and 1% higher volumes, largely due to chemicals and energy as well as electronics. The electronics end-market, which represents 9% of total sales, was strong during the quarter, rising 6% year over year. Lamba said on the call that he expects that end market to remain strong in the U.S. “Electronics already in play. As you know, we won and built the Phoenix — supply to the Phoenix fab for TSMC. We are building a deal in Texas for Samsung. We’re also building with other players in the U.S. So, we certainly see that growth potential on the electronic side.” TSMC , short for Taiwan Semiconductor Manufacturing Co., is building a manufacturing plant in Arizona and Samsung building a chip manufacturing plant in Texas. The company sees the nascent technology quantum computing as a long-term opportunity. “As it matures and scales up, the fact that quantum computing requires cryogenic cooling is an exciting opportunity from a Linde perspective,” Lamba said. “We have some great proprietary technology around that, and we’re excited to see what happens in that space. Even today, we are providing some cryogenic cooling technologies.” Asia Pacific (APAC) and Europe, Middle East & Africa (EMEA) sales each decreased from the year-ago period and came up short of estimates. China was described as a mixed bag in Asia Pacific (APAC). “I’m not expecting any growth from China for the year,” Lamba said on the call. He added, though, that “there are some green shoots, batteries, electronics.” As for Europe, Middle East & Africa (EMEA) sluggish demand continued. “There is unfortunately … no catalyst for change to the current trajectory,” Lamba said. Sales for engineering , which Linde reports as an operating segment alongside the regional results, rose year over year and matched estimates. Operating profits rose year over year for all four main segments; APAC was the only one to miss estimates. Adjusted operating margins increased for all four; Americas was the only one to miss. Guidance Linde said its forward guidance assumes recessionary conditions at the midpoint and a 2% year over year currency headwind. For its fiscal 2025 second quarter, Linde expects adjusted EPS between $3.95 and $4.05, up 3% to 5% year over year but below the $4.09 expected. Full-year 2025 adjusted EPS guidance is seen between $16.20 to $16.50, representing 4% to 6% growth and, at the midpoint, above the $16.46 expected. Linde projects full-year capital expenditure between $5 billion and $5.5 billion to support growth and maintenance. At the midpoint, the capex assumptions exceeded the $5.06 billion expected. “If things are better, we’ll perform better, and if worse, we’ll take actions to mitigate,” White said. (Jim Cramer’s Charitable Trust is long LIN. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. 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The Linde AG logo on a liquid hydrogen tanker truck taking a fuel delivery at the Linde hydrogen plant in Leuna, Germany, on Tuesday, July 14, 2020.
Rolf Schulten | Bloomberg | Getty Images
Industrial gas and engineering giant Linde on Thursday delivered a solid quarter in a tough economic environment, capitalizing on its ability to raise prices and drive productivity gains.