Chart Industries (GTLS) Misses Q4 EPS by 18c, Revenues Miss; Raises FY20 EPS/Revenue Guidance Above Consensus

Chart Industries (NASDAQ: GTLS) reported Q4 EPS of $0.72, $0.18 worse than the analyst estimate of $0.90. Revenue for the quarter came in at $343.5 million versus the consensus estimate of $379.62 million.

• Full year record orders of $1.413 billion, a 23.7% increase (10.8% organic) over full year 2018, driven by record orders in trailers, LNG fueling stations, cryogenic equipment in India, lasers, hydrogen, cannabis and water treatment.
• Record backlog ($762.3 million), up 34.2% from the fourth quarter of 2018 (32.2% organic increase) driven by strong fourth quarter 2019 orders including the highest order quarter in history for Distribution & Storage Western Hemisphere (“D&S West”).
• Received engineering release in December 2019 for a Big LNG project for which orders are expected to be received in 2020.
• Full year record sales of $1,299.1 million, a 19.8% increase over 2018 supported by record organic sales.
• Full year reported earnings per diluted share $1.32 included substantial transaction, integration and restructuring costs, resulting in full year record adjusted diluted EPS of $2.52. The one-time costs in 2019 were related to restructuring and integration work that is expected to return $38.3 million annually beginning in 2020.
• Increased 2020 base revenue guidance to $1.645 billion to $1.710 billion and base adjusted diluted EPS guidance to $4.90 to $5.50, reflecting timing and strength of fourth quarter 2019 order activity.

“Significant demand in the fourth quarter of 2019 for our cryogenic equipment in both global infrastructure applications as well as specialty markets contributed to 2019 record orders, sales and backlog for Chart” said Jill Evanko, Chart’s President and CEO. “With the expectation of continued broad-based order strength throughout 2020 as well as additional Big LNG orders, we expect 2020 to be another record year.”

GUIDANCE:

Chart Industries sees FY2020 EPS of $4.90-$5.50, versus the consensus of $4.85. Chart Industries sees FY2020 revenue of $1.645-1.71 billion, versus the consensus of $1.64 billion.

The noisy fourth quarter 2019 is expected to positively impact 2020. These include: (1) revenue shortfall of $30 million to prior guidance, driven by timing of fourth quarter orders from earlier in the quarter to December or into the first quarter of 2020. Specifically, we booked over $65 million of orders in the last two weeks of the year and over $120 million in the month of December, none of which could be shipped or recognized as revenue in 2019. We expect $30 million of fourth quarter 2019 timing changes to be recognized in 2020, with associated diluted earnings per share ($0.15 to $0.20) also in 2020; and (2) inefficiencies from ramp up costs associated with our Big LNG 2020 manufacturing activity and the capacity expansion for trailers and fueling stations in D&S East. The estimated impact of these costs to diluted earnings per share in the fourth quarter was $0.12 to $0.15 also reflected in our 2020 guidance. We expect that with the associated volumes in 2020, these inefficiencies will repeat in the first quarter of 2020 but be absorbed by the second quarter.

Our 2020 guidance includes one Big LNG project’s revenue (Venture Global Calcasieu Pass). Any additional Big LNG orders, which we do anticipate receiving in 2020, are not included in the outlook.

• Revenue: Our revenue outlook is $1.645 billion to $1.71 billion, compared to the prior total revenue outlook of $1.615 to $1.68 billion. The increase is driven from the timing shifts of fourth quarter 2019 orders and revenue. Both guides are and were inclusive of $100 million dollars of Calcasieu Pass related revenue. While we expect to receive formal notice to proceed (“FNTP”) on Driftwood and Cheniere Corpus Stage 3 Big LNG projects in 2020, these opportunities are not included in our current revenue or earnings per share guidance.
• Adjusted Diluted EPS: We expect full year adjusted earnings per diluted share to be in the range of $4.90 to $5.50 per share, on approximately 36.1 million weighted average diluted shares outstanding. This is an increase from our prior outlook of $4.75 to $5.25 per share. This excludes any restructuring costs and transaction-related costs, or any dilution associated with our convertible notes, and as such is a non-GAAP measure.
• Timing within the year: The 2020 outlook is weighted to the second half of the year for both revenue and earnings. Typically, the first quarter of the year is our lowest quarter, and we expect that will hold true in 2020, with expected results at or slightly below our fourth quarter 2019 results. Additionally, Calcasieu Pass revenue recognition will primarily be in the third and fourth quarters.
• Tax rate: Our 2020 tax rate is assumed at 20%. This is an improvement from our prior outlook’s tax rate of 21%, driven by the strategic tax planning efforts completed in the fourth quarter of 2019.
• Capital Expenditures: Our capital expenditure outlook remains between $35 and $40 million, inclusive of $30 million of maintenance capex and between $5 and $10 million related to our productivity and strategic capacity expansion activities. Note that this range is consistent with our 2019 actual capital spend of $36.2 million.
• Free Cash Flow: Our free cash flow outlook is $180 million to $210 million, inclusive of $30 million of free cash flow related to Calcasieu Pass.

For earnings history and earnings-related data on Chart Industries (GTLS) click here.

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