Chart Industries (GTLS) Tops Q1 EPS by 6c

Chart Industries (NASDAQ: GTLS) reported Q1 EPS of $0.57, $0.06 better than the analyst estimate of $0.51. Revenue for the quarter came in at $321.1 million versus the consensus estimate of $326.12 million.

• Orders for medical oxygen critical care products increased by 34% over the first quarter 2019; Increased associated production by over 50% to meet continued demand for liquid oxygen for COVID-19 patients
• Gross margin as a percent of sales of 28.5% (29.7% normalized for restructuring charges) is an increase of 530 basis points over the first quarter 2019 and 350 basis points over the fourth quarter 2019 reflecting benefits from completed cost reduction actions
• Executed on $49 million of annualized cost savings year-to-date 2020; this is in addition to the $38 million completed in 2019
• Booked $29.5 million order for a PDH separation plant in February 2020
• Reported earnings per diluted share of $0.24 includes restructuring and other one-time items resulting in adjusted earnings per diluted share of $0.57, a 46% increase over the first quarter 2019 adjusted earnings per diluted share
• Completed bank covenant amendment for net leverage ratio (4.25X through December 31, 2020 and 4.00X through June 30, 2021)
• We are withdrawing prior 2020 full year guidance due to uncertainty of the duration and impacts from the COVID-19 pandemic but reiterate our long-term strategy and ongoing cost alignment

Order activity for our medical oxygen products used in hospital applications increased 34% in the first quarter 2020 when compared to the first quarter of 2019 and increased 29% when compared to the fourth quarter of 2019. The regional breakdown compared to the first quarter of 2019 is:

• In China, an increase of 69%;
• In Europe, an increase of 21%;
• In India, an increase of 122%; and
• In the United States, an increase of 39%.

“Typically, my quote would be about the financials and decisive, agile responsiveness during this unprecedented time. The related facts in this release contain that information, and instead I would like to thank our team members who, as essential personnel, have worked tirelessly and safely to increase production on critical care products that are being used globally to save lives,” stated Jill Evanko, Chart Industries’ CEO.

OUTLOOK 2020

Chart’s business is structurally very different during this anticipated downturn than the last downturn in the 2014 to 2016 timeframe. The composition of the portfolio of products we offer, the acquisition and divestiture activities that have resulted in a much more diverse and geographically broad company and our cost reduction efforts to date set us up for continued earnings and cash flow through an anticipated downturn. Additionally, in the 2014 to 2016 timeframe, we had virtually no aftermarket, service and repair revenue, while these now account for over 13% of total Chart revenue. In the prior cycle, we were heavily reliant on one Big LNG project. We now think of Big LNG as “icing on the cake” and have line of sight to growth in many of our base businesses across the cycle. Finally, we have a much more diversified, global footprint which accesses applications and projects that previously were not economical. A year and a half ago we sold into 21 countries. We now work on projects and sell into over 70 countries.

Yet even with these changes, there remains a high amount of uncertainty surrounding the potential business impacts from COVID-19. While we have not yet seen a meaningful impact on total bookings, although a shift from E&C FinFans to D&S West and D&S East is expected, we are withdrawing our prior 2020 full year guidance until we have more clarity on the duration and severity of the situation. While we think it is prudent holding off on issuing new guidance until the situation stabilizes, we can provide the following data points for 2020:

• Venture Global’s Calcasieu Pass project remains on schedule, with $100 million of expected revenue in our E&C Cryo segment in 2020.
• We are seeing a short-term increase in demand in our medical related products. Products that we manufacture that can be used in these applications were 21% of total Chart revenue for the full year 2019.
• We continue to expect strong free cash flow generation in the year, and we have suspended our share buyback program.
• We continue to prioritize debt paydown.
• Year-to-date, we have taken cost reductions totaling $48.8 million of annualized savings. This is in addition to the $38 million of savings from cost reductions taken in 2019.
• Our expected effective tax rate remains unchanged at 20% for the full year 2020.
• Our capital expenditures are flexible, and we will continue to assess the spend as the year progresses. At this time, we anticipate capex spend will be in the $25 million to $30 million range.
• We expect the full year basic weighted average shares outstanding to be 35.45 million, based on our March 2020 share buyback of approximately 750,000 shares.

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

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