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Chart Industries (GTLS) on Acquisition Spree, Buys VCT Vogel

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Chart Industries, Inc. (GTLS - Free Report) announced that it has acquired VCT Vogel GmbH (VCT Vogel) yesterday. Financial terms of the transaction have not been disclosed. The engineered equipment manufacturer’s shares gained nearly 1.1% yesterday, closing the trading session at $33.74.

What the Buyout Means?

As revealed, VCT Vogel provides specialized services for cryogenic as well as mobile gas tank equipment and trucks. Also, it provides truck mounted drive and control systems used in trailers, rigid trucks and containers. These specialized services along with others account for nearly 55% of VCT Vogel’s revenues.

Chart Industries will integrate the acquired assets with its Distribution & Storage segment, enhancing its revenue generation capabilities by $4 million. The company anticipates that VCT Vogel will complement its existing mobile equipment businesses while strengthening its foothold in Switzerland, Southern Germany and Austria. Going forward, VCT Vogel will provide services to the company’s European customers for products including Chart Ferox and Flow Instruments.

Inorganic Expansion Fuels Growth

Chart Industries prefers to invest in acquisitions to gain access to new customers, regions and product line. We believe that a diverse product portfolio, along with new business wins, should help it deliver solid results in the quarters ahead. For 2017, the company anticipates revenues to come in the range of $875-$925 million and adjusted earnings to range from 60 cents to $1.00 per share.

Notably, in June this year, the company signed an agreement to acquire Hudson Products Corporation, provider of air-cooled heat exchangers and axial flow cooling fans. These assets will be integrated with the company’s Energy & Chemicals segment and is anticipated to add $205 million of revenue generation capacity in 2017. Also, these assets are expected to be accretive to earnings per share in the first year following the deal closure in third-quarter 2017. Additionally, the company anticipates realizing annual cost synergies of $7 million in two years from deal completion. In January, the company’s subsidiary, Chart Lifecycle acquired Hetsco, Inc. The buyout has strengthened Chart Lifecycle’s welding services offered to industrial gas and gas processing units.

Zacks Rank & Stocks to Consider

With a market capitalization of nearly $1 billion, Chart Industries currently carries a Zacks Rank #3 (Hold). Despite the positives of such buyouts, earnings estimates for the stock have been revised downward, reflecting negative sentiments. The Zacks Consensus Estimate for 2017 declined 2.7% to 72 cents. The estimate represent year-over-year decline of 38.3%.

We believe that disappointing results in second-quarter 2017 and weak outlook led to weak sentiments for the stock. Adjusted earnings per share in the quarter declined 70.8% year over year while revenues were down 3.6%. For 2017, the company anticipates adjusted earnings to be within 65-80 cents, down from $1.17 recorded in 2016. Following the results release on Jul 27, the company’s share price has fallen 6.3%, wider than 2% decline of the industry it belongs to.

Some better-ranked stocks in the same space are Sun Hydraulics Corporation (SNHY - Free Report) , Kadant Inc. (KAI - Free Report) and Altra Industrial Motion Corporation (AIMC - Free Report) . While both Sun Hydraulics and Kadant sport a Zacks Rank #1 (Strong Buy), Altra Industrial Motion carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Sun Hydraulics’ earnings estimates for 2017 and 2018 were revised upward in the last 60 days. Also, the company performed well in the last quarter, delivering a positive earnings surprise of 33.33%.

Kadant’s average earnings surprise for the last four quarters was a positive 19.29%. Also, earnings expectations for 2017 and 2018 improved over the past 60 days.

Altra Industrial Motion’s earnings estimates for 2017 and 2018 were revised upward in the last 60 days. Also, the company pulled off an average positive earnings surprise of 16.95% over the last four quarters.

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