Linde plc’s (LIN - Free Report) favorable financial position, strong fundamentals and upbeat growth estimates make it a solid investment option. Also, its efforts to improve its position in the clean hydrogen space bode well.
Let’s analyze the factors that make this currently Zacks Rank #2 (Buy) stock an attractive bet. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Earnings Growth Estimate
The Zacks Consensus Estimate for 2020 earnings per share is pegged at $7.77, indicating a 5.86% improvement from the year-ago reported figure. Also, the Zacks Consensus Estimate for 2021 earnings per share stands at $8.90, suggesting a 14.45% rise from the prior-year reported number.
Moreover, the long term (three-five years) earnings growth rate is pegged at 11%.
Management believes that the company’s project backlog is indicative of its sales growth. Linde’s current sale of gas and equipment backlog of $8.6 billion provides a strong growth foundation for the next several years.
The company’s trailing four-quarter earnings surprise is 7.54%, on average.
In July, Linde started an air separation unit and the first of the three nitrogen generators as part of its 15-year contract to supply ultra-high purity industrial gases to a major electronics customer in Taiwan. Also, the company announced plans to commence construction of the world's first hydrogen refueling station for passenger trains in Bremervörde, Germany during September. Further, it signed a Memorandum of Understanding with Beijing Green Hydrogen Technology Development Co., Ltd., a subsidiary of China Power International Development Ltd., to jointly promote the application and development of green hydrogen in China.
The company also inked many other deals this year, which will enhance its footprint in the clean hydrogen space while its existing capability in the clean hydrogen value chain will allow it to benefit from rising demand for clean hydrogen on a global scale.
Linde’s debt-to-capital is 26.73% compared with the industry’s 43.20%. As of Jun 30, 2020, cash and cash equivalents were $4.9 billion, up from $2.7 billion as of Dec 31, 2019. Available operating cash flow of the company at the end of the second quarter of 2020 was $1.4 billion compared with $0.5 billion in second-quarter 2019.
The company with the approval of its board of directors announced new dividend of 96.3 cents per share, 10% higher than the previous figure of 87.5 cents. Following this hike, the company’s new annualized dividend amounted to $3.85 per share.
Year to date, Linde has returned $2.8 billion to its shareholders through share repurchases and dividend payouts.
Return on Equity (ROE)
The company’s ROE for the trailing 12 months is 8.27%, comparing favorably with its industry’s 6.04%. This uptrend reflects its higher efficiency in utilizing its shareholders’ funds than its peers.
The stock has rallied 43.1%, outperforming the industry’s growth of 33.1% in the past six months.
Other Stocks to Consider
A few other top-ranked stocks in the same sector are CrossAmerica Partners LP (CAPL - Free Report) , Halliburton Company (HAL - Free Report) and TC PipeLines, LP (TCP - Free Report) , all carrying the same Zacks Rank as Linde, presently.
CrossAmerica Partners LP delivered an earnings surprise of 42.04%, on average, in the last four quarters. The Zacks Consensus Estimate for 2020 earnings has moved 19.7% north in the past 60 days.
Halliburton Company has a long-term earnings growth rate of 6.53%. It delivered a surprise of 44.95%, on average, in the last four quarters.
The Zacks Consensus Estimate for TC PipeLines’ 2020 earnings has moved 4.2% north in the past 60 days. The company delivered an earnings surprise of 19.34%, on average, in the trailing four quarters.
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