Sometimes good is just not good enough. Industrial gases heavyweight Linde (LIN) delivered an estimate-beating Q2 earnings report, yet the outperformance got a muted response from investors, with shares dropping slightly in the following session.
Q2 revenue came in at $6.38 billion, indicating an 11.4% year-over-year drop but was ahead of the consensus estimate by $130 million. Non-GAAP EPS of $1.90 beat the Street’s forecast by $0.25.
Deutsche Bank analyst David Begleiter chalked the response up to a conservative outlook for Q3 and to a certain extent, Q4. However, Begleiter notes that during the earnings call, management indicated Q3 EPS could come in above the guidance range, if June momentum is extended into Q3. As it happens, so far, July numbers are trending a touch above June’s.
The estimate-beating performance was driven by price hikes and productivity initiatives which led to higher than anticipated results for the multinational chemical company in the Americas and EMEA. These, in turn, helped to offset lackluster results in Asia.
For Begleiter, the report is a clear indication that investors’ cash is in safe hands.
The 5-star analyst said, “With Linde executing well on cost, productivity and pricing actions (we note that Q2 marked Linde’s 6th straight earnings beat and 4th consecutive quarter of significant margin expansion), a highly resilient business model, a growing slate of opportunistic investment opportunities including a potentially large one in clean hydrogen and valuation a fair 26.2x ’21E EPS, we reiterate our Buy rating.”
The positive assessment comes with a price target boost, as the figure moves from $225 to $275. This suggests shares will be zooming past the recently set all-time high and investors will pocket a 10% gain over the coming months. (To watch Begleiter’s track record, click here)
The Deutsche Bank analyst is not alone in his upbeat evaluation, as Linde has the majority of the Street on its side. LIN’s Strong Buy consensus rating is based on 16 Buys and 4 Holds. The average price target comes in at $254.79 and implies modest upside potential of 2.63% from current levels. (See Linde stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis and to consider your own personal circumstances before making any investment.
