On Friday, Evercore ISI affirmed its Outperform rating on Linde (NASDAQ:NYSE:LIN) with a steady stock price target of $425.00. The industrial gas giant Linde's recent acknowledgment of a cautious outlook for the year, despite a strong first-quarter performance that surpassed both consensus and company guidance, surprised the market.
The company's results did not reveal any significant weaknesses, aside from its exposure to the slowing global industrial economy.
Linde's decision to maintain its guidance midpoint rather than raise it, as has become customary, indicates a more conservative stance in light of current end-market conditions. This move has caused some surprise among investors, leading to a pullback in the stock.
Despite this, Evercore ISI suggests that in the event of a further economic downturn, Linde's defensive position in the chemical sector may become more attractive to investors.
The analyst points out that Linde's price-to-earnings ratio of nearly 29 times next twelve months (ntm) earnings is viewed as costly, even for Linde. Still, current and previous fiscal year 2024 earnings per share (EPS) estimates from both the firm and the street, which stand at $15.50 and $15.41 respectively, still fit within Linde's newly tightened guidance range of $15.30 to $15.60.
Taking into account the first-quarter earnings beat, Evercore ISI's full-year estimate remains largely unchanged. Although the implied year-over-year EPS growth rate is slightly below the 10% benchmark, the analyst suggests that market expectations need to adjust to the evolving economic landscape.
By setting a more measured forecast now, Linde may avoid appearing reactive to changes later in the year. Evercore ISI concludes by maintaining its Outperform rating on Linde shares.
InvestingPro Insights
Adding to the analysis by Evercore ISI, real-time data from InvestingPro provides a nuanced view of Linde's (NASDAQ:LIN) financial health and market performance.
The company's P/E Ratio (Adjusted) for the last twelve months as of Q4 2023 stands at 32.36, which is higher than the industry average, potentially justifying the 'costly' label mentioned by analysts. Despite a slight revenue decline of -1.53% during the same period, Linde's quarterly revenue growth shows resilience with a 5.1% increase in Q4 2023, indicating a possible rebound.
Linde's robust fundamentals are further evidenced by a Gross Profit Margin of 46.76% and an Operating Income Margin of 25.2%, both of which underscore the company's efficiency and profitability. Investors might also take note of the company's solid dividend profile, with a current yield of 1.33% and a dividend growth of 8.97% over the last twelve months.
For those seeking to delve deeper into Linde's prospects, InvestingPro offers additional insights. With the provided coupon code PRONEWS24, readers can access these in-depth analyses at a discounted rate. Currently, there are 5 more InvestingPro Tips available for Linde, which could help investors make more informed decisions by considering the company's valuation, future growth potential, and market sentiment.
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