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On Tuesday, Citi adjusted its financial outlook for Chart Industries (NYSE:GTLS) shares, a manufacturing company specializing in equipment used in the production of industrial gases. The firm's analyst has reduced the price target to $190 from the previous $210, while still holding a Buy rating on the company's stock.
The revision follows Chart Industries' second-quarter earnings, which fell short of expectations, prompting a downward revision of approximately 10% in the full-year 2024 EBITDA guidance.
The analysis of the past six months' backlog conversion rates across various segments suggests that achieving the revenue forecasts could be challenging.
Chart Industries is now projected to generate $4.28 billion in revenue for the full year 2024, which is not only below the consensus estimate of $4.46 billion but also falls short of the low end of the company's own guidance of $4.45 billion. The necessary conversion rates to meet the midpoint of the company's guidance are viewed as optimistic by the analyst.
The firm's EBITDA forecast for 2024 has been set at $1.03 billion, which is also below the consensus of $1.09 billion. The free cash flow (FCF) for the same period is expected to be around $368 million. Looking ahead to 2025, the analyst anticipates a modest improvement in conversion rates and forecasts an EBITDA of $1.21 billion.
Despite the near-term adjustments, the medium-term investment thesis for Chart Industries is still considered attractive by Citi. The analyst suggests that a more conservative approach to near-term guidance could highlight the company's potential. The new price target of $190 is derived by applying a 10x multiple to the anticipated 2025 EBITDA.
InvestingPro Insights
As Chart Industries navigates the challenges reflected in its recent earnings and guidance revisions, InvestingPro data and tips offer additional context for investors. According to InvestingPro, Chart Industries is currently trading at a high earnings multiple with a P/E ratio of 194.42. However, when adjusted for the last twelve months as of Q2 2024, the P/E ratio stands at a more moderate 34.02, suggesting that investors are expecting earnings to grow. This aligns with one of the InvestingPro Tips indicating that net income is expected to grow this year.
Furthermore, the company's revenue growth over the last twelve months has been substantial at 70.25%, which may provide some optimism regarding its future performance. Despite recent price declines, with the stock having taken a significant hit over the last week and trading near its 52-week low, some analysts remain positive on the stock's potential, as reflected in Citi's maintained Buy rating and the InvestingPro Tip that analysts anticipate sales growth in the current year.
For those considering an investment in Chart Industries, the InvestingPro platform offers a comprehensive set of 15 additional tips to help investors make informed decisions. These tips include insights on market sentiment, financial health, and future growth potential, available at https://www.investing.com/pro/GTLS.
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