3 Trends Boost Chart- LNG, Biopharma, Cannabis

Chart Industries (GTLS) is in the unique position of having exposure to several growth trends, including fuel, biomedical and cannabis.

Chart’s primary market involves the manufacture of cryogenic equipment used to convert natural gas into a more portable liquefied natural gas (LNG) form, presenting a big opportunity in the lucrative natural gas important/export market.

Chart is also involved with the biopharma industry, providing some of the storage equipment needed to keep coronavirus vaccines super-cooled. And in the weed sector, it makes equipment that’s used to extract CBD oil from cannabis.

In the first quarter, revenue of $288 million was 4% lower from a year ago, but in line with the company’s expectations. Per-share earnings of 80 cents were 30% higher (and 5% above consensus) due to the easy comparison.

More important were the forward-looking measures: Chart boasted record orders of $417 million in the quarter, driven by demand for clean energy products, as well as increased liquefaction orders for LNG and hydrogen. This resulted in a record backlog of $934 million (up 29%), while gross margin hit a four-year high.

Going forward, management sees opportunity in the clean energy revolution, which it believes is in the early innings (the company recently acquired a 5% interest in sustainable chemical technology company Transform Materials, which converts natural gas into acetylene and hydrogen via a net carbon-negative process).

Chart further expects a strong second half of 2021 and predicts this year’s top line will be around $1.38 billion—up 17% and in line with the consensus—while earnings are expected to surge 41% from last year. It’s a good story.

Technically, GTLS built a two-month base early last fall, with an October breakout bringing the stock to yearly highs. The run from there was terrific, not hitting resistance until sellers stepped in during February.

After that came a lot of chop and a couple of shakeouts below the 50-day line, but the action since earnings has been solid, with GTLS snapping right back to its old high. The pullback of the past couple of days looks normal to us, so if you are game, you can start a position here.

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