On Monday, Stifel, a financial services firm, adjusted its outlook on Chart Industries (NYSE:GTLS) stock, a manufacturer of highly engineered equipment servicing multiple applications in the energy and industrial gas markets. The firm's analyst has lowered the price target on the company's shares to $220 from the previous $224, while continuing to recommend a Buy rating.
The analyst's report follows Chart Industries' first-quarter earnings, which were slightly below expectations. However, the company's new orders surpassed projections, with a book-to-bill ratio of 1.18 times. This measure indicates that Chart Industries received more orders than it billed, which is a positive indicator of future revenue.
Management at Chart Industries anticipates the book-to-bill ratio to stay above 1 throughout the remainder of the year. This is despite an anticipated significant rise in revenue.
The firm's industrial and liquefied natural gas (LNG) sectors are maintaining robust activity levels. Yet, the highlight comes from the company's burgeoning hydrogen and carbon capture businesses, which are expected to be key drivers of long-term growth.
The analyst noted that Chart Industries remains a "show me" story, suggesting that the company must demonstrate its ability to meet its targets. If Chart Industries achieves its 2024 guidance, the expectation is that its valuation could align more closely with its industrial peers.
This potential re-rating is based on the company's shift from being predominantly an oil and gas services provider to a more diversified industrial company with recurring business.
The report concludes with the analyst's expectation that straightforward execution throughout the current year should propel Chart Industries' stock price into the $200 range. The company's focus on hydrogen and carbon capture is particularly significant, as these areas represent emerging markets with substantial growth potential.
InvestingPro Insights
As Chart Industries (NYSE:GTLS) navigates through a transformative phase, InvestingPro data reflects a company with strong recent performance and positive future expectations. With a market capitalization of $5.56 billion and a remarkable revenue growth rate of 110.73% over the last twelve months as of Q1 2024, Chart Industries is solidifying its position in the energy and industrial gas markets. The company's stock has experienced a significant return of 31.01% over the last three months, underscoring the market's response to its strategic direction.
Two InvestingPro Tips for GTLS highlight the dichotomy in its valuation metrics: while the company trades at a high earnings multiple with a P/E ratio of 51.67, it also presents a low PEG ratio of 0.26, which may indicate potential for future earnings growth relative to its share price. Additionally, analysts predict sales growth in the current year and expect the company to be profitable, aligning with the positive book-to-bill ratio mentioned in the Stifel report.
For readers interested in a deeper dive into Chart Industries' financial health and future prospects, there are additional InvestingPro Tips available at https://www.investing.com/pro/GTLS. And for those considering an InvestingPro subscription, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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