L'Air Liquide (OTCPK:AIQUY) and Linde (NYSE:LIN) are two of the largest industrial gas companies in the world. L'Air Liquide is French, while Linde is headquartered in Ireland. They both benefit from operating in an attractive industry, which has very favorable dynamics for a number of reasons. First, industrial gases typically account for only a very small percentage of the customer's costs, but they are a critical input. As such, reliability is more important than price in most cases. Second, there are high switching costs for customers to change suppliers, and it is also common for them to sign long-term supply contracts. This combination of high value to price, and significant switching costs, contribute to the competitive moats of both companies, allowing them to have high profit margins and earn excellent returns on capital.
Another thing to like about these companies is that they are quite stable and less affected by the cyclicality of the economy compared to others. Historically both companies have delivered solid results, but Linde has managed to outperform the S&P 500 index (SPY) in the last ten years by a small margin, while L'Air Liquide has underperformed.
Performance Targets
L'Air Liquide has a CAGR sales growth target of +5-6% and a return on capital employed of more than 10% starting in 2023. Linde has not been that specific with their financial performance objectives, but in its most recent earnings call management said they feel confident in delivering 10 plus percent EPS growth over the next several years.
One thing to note is that Linde's EPS has been more volatile, for example its earnings took a big hit during the worst of the Covid crisis, while L'Air Liquide's earnings remained more stable. That said, in the past ten years Linde has grown its earnings per share at a slightly faster pace, but much of it was thanks to the synergies resulting from its merger with Praxair.
Some of the growth differences can also be explained by their different geographic exposures. L'Air Liquide has a stronger market share in Europe, which is its primary market, while Linde is more diversified in terms of geography and has a strong presence in North America and Asia.
Hydrogen Strategy
Both companies have been investing in hydrogen infrastructure for some time, but the Inflation Reduction Act has accelerated very significantly the growth potential for this part of the business. Linde is estimating that it could make more than $20 billion of potential investments in the coming years, with some of the larger ones related to blue and green hydrogen and blue ammonia. Meanwhile, L'Air Liquide aims to triple its hydrogen sales by 2035. Needless to say, hydrogen is going to become one of the most important growth areas for both companies.
Financials
After its merger with Praxair, Linde became the largest industrial gases company in the world by revenue, surpassing L'Air Liquide. It is difficult to compare their revenue growth as much of Linde's is the result of that merger, but it is clear that both companies are growing sales at a similar rate and that growth has accelerated recently.
While L'Air Liquide has significantly higher gross profit margins, they both have relatively similar operating margins. For industrial companies these close to 20% operating margins are excellent, and the result of the competitive moats both companies have.
Balance Sheet
Both companies carry a similar amount of long-term debt, but Linde is slightly less leveraged as it has a higher EBITDA.
Dividend Yield and Dividend Growth
L'Air Liquide currently has a slightly higher dividend yield at ~1.8% compared to Linde's ~1.4%. Both companies have an impressive track record of growing their dividends for several decades. Linde's dividend has been growing more quickly in recent years, but L'Air Liquide's +8.3% 30 year CAGR is quite respectable. Interestingly, L'Air Liquide has a program to reward long-term shareholders by increasing the dividend by 10% after two years, but if we understand correctly shares have to be held directly.
Valuation
In the past ten years Linde has been consistently valued at higher valuation multiples compared to L'Air Liquide. We believe, however, that the difference is too significant at the moment, with Linde trading with an EV/Revenue multiple about two turns higher.
Similarly, Linde is trading with an EV/EBITDA about 5 turns higher compared to L'Air Liquide, and about 4 turns higher compared to its own ten year average.
L'Air Liquide is currently trading at only a slight premium to its ten year average price/earnings ratio, while Linde is trading at almost a 50% premium. The Non-GAAP forward p/e ratio for Linde is roughly 27x, while that of L'Air Liquide is ~23x. Seeking Alpha gives Linde an 'F' valuation grade, while it gives L'Air Liquide a 'D-' note.
Based on our estimates for future earnings we calculate a fair value for Linde of $295 per share, which implies a ~10% overvaluation. For L'Air Liquide we estimate a fair value of ~$33 for the ADRs, which implies a slight undervaluation of ~6%. We use a 9% discount rate in both cases.
The Verdict
At the moment we believe L'Air Liquide to be the better option for long-term investors, given the more attractive valuation and higher dividend yield. It also has shown more stability in its financial results. That said, Linde has been growing its dividend at a faster rate in recent years, has more exposure to faster growing geographies, and has slightly less leverage.
Risks
Both companies are exposed to regulatory risks that could increase their costs, and being international companies they also have currency risks. They both have significant debt, which could make them more vulnerable to economic downturns. Still, we consider both companies to be very resilient and more defensive than the average company.
Conclusion
L'Air Liquide and Linde are two leading industrial gas companies that greatly benefit from operating in a favorable industry, and both have strong competitive moats. Both companies are also investing in hydrogen infrastructure for future growth. They both have a strong track record of growing dividends for shareholders. Linde has outperformed L'Air Liquide in the past decade, but L'Air Liquide currently has a higher dividend yield and a more attractive valuation.
Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.
This article was written by
WideAlpha
4.18K
Follower
s
Fin-tech startup leveraging machine learning technology to discover investing opportunities and to generate growth-optimal portfolios. Publisher of the WideAlpha AI-Selected Index, which has markedly outperformed its benchmark.
Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling shares, you should do your own research and reach your own conclusion, or consult a financial advisor. Investing includes risks, including loss of principal.
FAQs
Is Air Liquide a good stock? ›
L'Air Liquide has received a consensus rating of Hold. The company's average rating score is 2.25, and is based on 3 buy ratings, 4 hold ratings, and 1 sell rating.
Is Linde a good stock to buy? ›Linde has received a consensus rating of Buy. The company's average rating score is 2.76, and is based on 14 buy ratings, 2 hold ratings, and 1 sell rating.
Who is the competitor of Linde? ›Linde Group's top competitors include CarbonBridge, Proteum Energy, and Yingde Gases.
Is Linde PLC overvalued? ›Linde plc - Buy
Valuation metrics show that Linde plc may be overvalued. Its Value Score of D indicates it would be a bad pick for value investors. The financial health and growth prospects of LIN, demonstrate its potential to underperform the market. It currently has a Growth Score of B.
- ConocoPhillips. ConocoPhillips is one of the largest E&P-focused companies in the world. ...
- Energy. Devon Energy is a U.S.-focused E&P company. ...
- Enbridge. Enbridge operates one of the biggest oil pipeline systems in the world. ...
- ExxonMobil. ...
- Phillips 66.
- American Water Works Co. Inc. (ticker: AWK)
- Essential Utilities Inc. ...
- Global Water Resources Inc. ...
- Xylem Inc. ...
- Invesco Water Resources ETF (PHO)
- First Trust Water ETF (FIW)
- Invesco S&P Global Water ETF (CGW)
Linde PLC (NYSE:LIN)
The 25 analysts offering 12-month price forecasts for Linde PLC have a median target of 375.00, with a high estimate of 418.00 and a low estimate of 299.39. The median estimate represents a +3.53% increase from the last price of 362.23.
On average, Wall Street analysts predict that Linde's share price could reach $368.85 by Feb 14, 2024. The average Linde stock price prediction forecasts a potential upside of 5.37% from the current LIN share price of $350.05.
Is Linde a good dividend stock? ›Does Linde have sufficient earnings to cover their dividend? Yes, LIN's past year earnings per share was $8.24, and their annual dividend per share is $4.78. LIN's dividend payout ratio is 38.05% ($4.78/$8.24) which is sustainable.
Is Linde a Fortune 500 company? ›The company expects hydrogen vehicles to compete with electric vehicles and has invested in wind powered plants that convert water to hydrogen. The company is ranked 463rd on the Fortune Global 500 and 187th on the Forbes Global 2000.
Who buys Linde? ›
Two-plus years after it was first announced, the $86 billion merger between Praxair and Linde has been approved by the U.S. Federal Trade Commission, clearing the last significant hurdle to creating the world's largest industrial gas supplier.
Did Messer buy out Linde? ›A new name in industrial gases is Messer Americas, the result of the acquisition last month of most of the American gases business of Linde plc, as well as certain of its business activities in South America, by Messer Group together with private-equity firm CVC Capital Partners.
What stock holds the most value? ›Berkshire Hathaway has the highest-priced shares of any U.S. company, and is also one of the largest companies in the world, consistently ranking in the top 10 by market value.
Which company has the highest stock value? ›- Alphabet Inc. ( Google)
- Madras Rubber Factory Limited (MRF)
- Amazon Inc.
- Booking Holdings Inc.
- NVR Inc.
- Seaboard Corporation.
- Berkshire Hathaway.
Dividend aristocrats are some of the most time-tested dividend blue-chips in America. But the world is full of top quality, and very dependable dividend growth powerhouses. BTI, ENB, NVS, SNY, FMS, RHHBY, MDT, CNI, and LIN are the 9 of the best global aristocrats you can buy in this bear market.
What is the most profitable oil company? ›Exxon, the largest U.S. oil producer, this week reported an epic $55 billion in profits for 2022.
What is the best oil stock to buy 2023? ›The Best Oil Stocks to Buy for 2023: ExxonMobil (XOM)
The Texas-based company said it earned a record $18.7 billion in Q3, up 177% from the same period a year earlier. Its earnings per share of $4.45 blew past analysts' average $3.79 forecast, according to Refinitiv data.
- XOM. Exxon Mobil Corp. premium. ...
- WMB. Williams Companies. premium. premium. ...
- MPC. Marathon Petroleum. premium. premium. ...
- CVX. Chevron. premium. premium. ...
- COP. Conocophillips. premium. premium. ...
- PSX. Phillips 66 (PSX) premium. premium. ...
- SLB. Schlumberger. premium. premium. ...
- EOG. EOG Resources Inc. premium. premium.
Pure Cycle (NASDAQ:PCYO) is the most undervalued water stock based on WallStreetZen's Valuation Score. Pure Cycle has a valuation score of 43, which is 26 points higher than the water industry average of 17.
What is the number 1 selling water? ›...
Top 10 Water Bottle Companies in the World 2020.
Rank | Water Bottle Company | Headquarters |
---|---|---|
1 | Aquafina | Wichita, Kansas, USA |
2 | Dasani | Atlanta, Georgia, USA |
3 | Nestlé | Vevey, Vaud, Switzerland |
4 | Danone | Paris, France |
What is the biggest water company in the US? ›
American Water Works company generated revenue of 3.78 billion U.S. dollars in 2020. American Water is the largest publicly traded water and waterwater utility in the United States.
Should I sell target price stock? ›Experienced investors are successful because they know how to set their emotions aside. One of the best things you can do for yourself is to set up a price target. Once you hit that target, it's the best time to sell your stock no matter what. That way, you'll lock in a solid profit.
How do you predict the target price of a stock? ›One of the most common methods of setting a target price is achieved by first identifying a technical chart pattern. After the pattern is identified, price targets can be set by measuring the height of the pattern and then adding it to (or subtracting it from) the breakout price.
How do you know a stock will go up? ›We want to know if, from the current price levels, a stock will go up or down. The best indicator of this is stock's fair price. When fair price of a stock is below its current price, the stock has good possibility to go up in times to come.
How old is Linde company? ›The Linde Group can look back at special milestones in its history since the 1880s.
What company pays the highest dividend? ›- V.F. Corporation (VFC) ...
- Devon Energy (DVN) Devon Energy is a producer of oil and natural gas and holds a portfolio of oil and gas properties in the U.S. ...
- Dow Inc. (DOW) ...
- International Business Machines (IBM) ...
- Verizon Communications (VZ) ...
- AT&T (T) ...
- Intel (INTC) ...
- Philip Morris International (PM)
- Pioneer Natural Resources Co. PXD. 6.73% 13.86%
- Altria Group Inc. MO. -1.48% 7.97%
- Verizon Communications Inc. VZ. -0.83% 6.74%
- Kinder Morgan Inc-DE. KMI. 0.11% 6.43%
- AT&T Inc. T. -2.23% 5.95%
- ONEOK Inc. OKE. -1.32% 5.77%
- Walgreens Boots Alliance Inc. WBA. -1.17% 5.30%
- Philip Morris International Inc. PM. -0.22% 5.15%
- XRX. Xerox. Jan 26, 2023. ...
- IBM. International Business Machines. Jan 25, 2023. ...
- CVX. Chevron. Jan 27, 2023. ...
- EOG. EOG Resources. Nov 03, 2022. ...
- EPD. Enterprise Products Partners. Feb 01, 2023. ...
- ET. Energy Transfer. Feb 15, 2023. ...
- HESM. Hess Midstream Partners. Jan 25, 2023. ...
- ARCC. Ares Capital. Feb 07, 2023.
Linde, Air Liquide, Air Products, and Taiyo Nippon Sanso are the largest industrial gas companies worldwide. Together, these four conglomerates account for over 80 percent of the industrial gas sector. Linde, a global multinational headquartered in Ireland, is currently the leading company in the industry.
Who is the Fortune 1 company? ›Rank | Company | Country |
---|---|---|
1 | Walmart | United States |
2 | Sinopec Group | China |
3 | State Grid | China |
4 | China National Petroleum | China |
How big of a company is Linde? ›
Description. Linde is a private company with an estimated 34,164 employees. In the US, the company has a notable market share in at least three industries: Oxygen & Hydrogen Gas Manufacturing, Organic Chemical Manufacturing, Heating & Air Conditioning Wholesaling and Organic Chemical Manufacturing.
What is Linde known for? ›Linde is a leading global industrial gases and engineering company with 2022 sales of $33 billion.
Is Linde a green company? ›Linde helps customers worldwide improve their environmental performance and reduce their carbon footprint. At the same time, we are committed to minimizing our own environmental resource intensity, including for energy, water and waste.
Does Linde operate in Russia? ›Linde is a major manufacturer of industrial, food, medical and special gases in Russia. Having gained a unique experience on the local market, we offer package solutions of gas supplies to companies in various production sectors.
Does Linde own Praxair? ›Praxair, Inc.
was an American worldwide industrial gases company. Founded in 1907, Praxair was the largest industrial gases company in North and South America, and the third-largest worldwide by revenue. In 2018 it merged with Linde AG to form Linde plc. The Praxair name was discontinued on September 1, 2020 in the US.
It can be obtained from natural CO2 springs, limestone kilns, fermentation processes and gas streams from chemical and petrochemical plants.
Is Air Liquide part of Linde? ›...
Air Liquide vs The Linde Group.
46% | Promoters |
---|---|
16% | Passive |
38% | Detractors |
- Coca-Cola. (NASDAQ: KO) ...
- Altria. (NASDAQ: MO) ...
- Amazon.com. (NASDAQ: AMZN) ...
- Celgene. (NASDAQ: CELG) ...
- Apple. (NASDAQ: AAPL) ...
- Alphabet. (NASDAQ:GOOG) ...
- Gilead Sciences. (NASDAQ: GILD) ...
- Microsoft. (NASDAQ: MSFT)
Company | Symbol | YTD % Stock Gain |
---|---|---|
Amazon.com | (AMZN) | 78.4% |
Netflix | (NFLX) | 53.9% |
MSCI | (MSCI) | 42.8% |
MarketAxess Holdings | (MKTX) | 32.3% |
Company | Price | Change |
---|---|---|
CTRA Coterra Energy Inc | 25.87 | +0.21 |
RE Everest Re Group Ltd | 383.22 | +1.89 |
NOC NORTHROP GRUMMAN CORP | 472.20 | +1.98 |
BBWI Bath & Body Works Inc | 39.47 | +0.12 |
What are the 10 most valuable stocks? ›
- MRF-₹86,650. Market Cap-₹36,802 crore.
- Page Industries-₹37,403. Market Cap- ₹41,636 crore.
- Honeywell Automation-₹35,600. Market Cap-₹31,343 crore.
- Shree Cement-₹25,521.6. Market Cap-₹92,083 crore.
- 3M India-₹23,421.15. ...
- Abbott India-₹20,565.10. ...
- Nestle India-₹18,539.60. ...
- Bosch-₹18,089.30.
In terms of market capitalization, Reliance Industries, which is headed by Mukesh Ambani, is the number one company in India.
What penny stocks have made it big? ›- GameStop Corp. (NYSE:GME)
- Ford Motor Company (NYSE:F)
- Monster Beverage Corporation (NASDAQ:MNST)
- Micron Technology, Inc. (NASDAQ:MU)
- QUALCOMM Incorporated (NASDAQ:QCOM)
The Aristocrats, which will number 67 with its new members, have paid out a higher dividend each year for at least 25 straight years. The newcomers are J.M. Smucker (ticker: SJM), C.H. Robinson Worldwide (CHRW), and Nordson (NDSN). The changes will take place prior to when the market opens on Feb.
What stocks have paid dividends for 100 years? ›What Companies Have Paid Dividends the Longest? Famously, the following companies are among those that have paid shareholders dividends for over 100 years: Coca-Cola, General Mills, Chubb, Colgate-Palmolive, Proctor & Gamble, Consolidated Edison, Eli Lilly, and Exxon Mobile.
What is a king dividend? ›Dividend kings are stocks that have raised their dividend for at least 50 consecutive years.
Should I buy Bldp stock? ›Ballard Power Systems, Inc.
may be overvalued. Its Value Score of F indicates it would be a bad pick for value investors. The financial health and growth prospects of BLDP, demonstrate its potential to underperform the market.
The 26 analysts offering 12 month price targets for L'Air Liqud Soct Ae pr l'Edeetl'EndsPsGe have a median target of 162.50, with a high estimate of 190.00 and a low estimate of 130.00. The median estimate represents a 6.85% increase from the last price of 152.08.
Is BTU a buy or sell? ›BTU Signals & Forecast
The Peabody Energy stock holds buy signals from both short and long-term moving averages giving a positive forecast for the stock, but the stock has a general sell signal from the relation between the two signals where the long-term average is above the short-term average.
Air Products and Chemicals' earnings over the next few years are expected to increase by 42%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
Which is the best power stock? ›
- Yes Bank.
- TCS.
- SBI.
- Infosys.
- Adani Power.
- Reliance.
- Tata Power.
- Idea.
- Best Utilities Stocks of March 2023.
- NextEra Energy, Inc. ( NEE)
- Duke Energy Corporation (DUK)
- The Southern Company (SO)
- Sempra (SRE)
- Dominion Energy, Inc. ( D)
- National Grid PLC (NGG)
- American Electric Power Company, Inc. ( AEP)
FuelCell Energy has received a consensus rating of Hold. The company's average rating score is 2.00, and is based on no buy ratings, 5 hold ratings, and no sell ratings.
What is a good price for Target stock? ›Target Corp (NYSE:TGT)
The 29 analysts offering 12-month price forecasts for Target Corp have a median target of 185.00, with a high estimate of 220.00 and a low estimate of 155.00. The median estimate represents a +13.13% increase from the last price of 163.53.
A price target is a price at which an analyst believes a stock to be fairly valued relative to its projected and historical earnings. When an analyst raises their price target for a stock, they generally expect the stock price to rise.
Is ACB a hold or sell? ›6 Wall Street analysts have issued "buy," "hold," and "sell" ratings for Aurora Cannabis in the last year. There are currently 5 hold ratings and 1 buy rating for the stock. The consensus among Wall Street analysts is that investors should "hold" ACB shares.