Chart Industries (GTLS -1.39%), a leader in cryogenic equipment manufacturing, released its third-quarter financial results on Nov. 1. Highlights of the report included an 18.3% year-over-year revenue increase to $1.06 billion (up 22.4% on a pro forma basis, accounting for businesses it divested in late 2023). However, that revenue figure missed analysts' consensus forecast for $1.10 billion. Adjusted earnings per share (EPS) of $2.18 also came in below analysts' expectations of $2.50. Despite those misses, operational improvements were evident, with gross margins reaching a record 34.1% -- a result that underscored its successful integration of its Howden acquisition.
| Metric | Q3 2024 | Analyst Estimate | Q3 2023 | % Change (YOY) |
|---|---|---|---|---|
| Adjusted EPS | $2.18 | $2.50 | $1.13 | 92.9% |
| Total revenue | $1.06 billion | $1.10 billion | $897.9 million | 18.3% |
| Gross margin | 34.1% | N/A | 30.8% | 330 basis points |
| Adjusted operating income | $235.9 million | N/A | $154.0 million | 53.2% |
Source: Analyst estimates for the quarter provided by FactSet.
Business Overview
Chart Industries specializes in the design and manufacture of cryogenic equipment used to liquify and store gases such as oxygen and nitrogen. It provides technology to businesses in a broadly diversified array of sectors, including the industrial space and the energy space, where its equipment is used in liquefied natural gas, liquid hydrogen, and carbon capture, utilization, and storage.
Recent strategic focuses include advancing clean energy initiatives, leveraging its diversified products, and enhancing operational synergies, notably through strategic acquisitions such as its March 2023 purchase of Howden. These acquisitions aim to fuel revenue through integrated product solutions while improving technology and manufacturing efficiencies. Its global manufacturing footprint and deep customer relationships further support these objectives.
Quarterly Performance and Achievements
During Q3 2024, Chart Industries achieved a record gross margin of 34.1%, reflecting successful strategies such as cost synergies from the Howden acquisition and operational efficiencies. Pro forma revenue increased by 22.4% from the prior-year period's $867.9 million to $1.06 billion. The heat transfer systems (HTS) segment notably saw a 151% increase in orders owing to demand from liquefied natural gas and traditional energy companies.
Adjusted EBITDA rose by 53.9% to $260.7 million, illustrating the company's operational excellence. The repair, service & leasing segment also excelled, posting a 36.1% sales surge. These areas collectively illustrate a company leveraging its synergies and extensive portfolio to achieve operational improvements despite market uncertainties.
Although the adjusted EPS of $2.18 missed analysts' consensus estimates due to factors like unfavorable foreign exchange rates and a higher tax rate, operationally, the company showed resilience. The Howden acquisition delivered impressive performance metrics, indicating fruitful integration and potential for future expansions.
There were challenges, such as potential revenue volatility stemming from the timing of large orders and macroeconomic headwinds, including the adverse impact of foreign exchange rate fluctuations. These factors created headwinds that affected the financial outcomes of this quarter.
Looking Ahead
Management was optimistic with its guidance, projecting full-year 2024 sales between $4.2 billion and $4.3 billion, and adjusted EBITDA in the range of $1.015 billion to $1.045 billion. Adjusted EPS is forecast to be around $9. In 2025, Chart expects revenues of $4.65 billion to $4.85 billion, and adjusted EBITDA of $1.175 billion to $1.225 billion. The company's clean energy transition focus remains strong, especially in the hydrogen and carbon-capture sectors. Investors should keep an eye on how Chart executes its ongoing strategic initiatives and navigates economic uncertainties.
