Chart (GTLS)

Gas handling company Chart (NYSE:GTLS) met Wall Street’s revenue expectations in Q1 CY2025, with sales up 5.3% year on year to $1.00 billion. The company’s full-year revenue guidance of $4.75 billion at the midpoint came in 2.5% above analysts’ estimates. Its non-GAAP profit of $1.86 per share was 1.8% above analysts’ consensus estimates.

Company Overview

Installing the first bulk Co2 tank for McDonalds’s sodas, Chart (NYSE:GTLS) provides equipment to store and transport gasses.

Gas and liquid handling companies possess the technical know-how and specialized equipment to handle valuable (and sometimes dangerous) substances. Lately, water conservation and carbon capture–which requires hydrogen and other gasses as well as specialized infrastructure–have been trending up, creating new demand for products such as filters, pumps, and valves. On the other hand, gas and liquid handling companies are at the whim of economic cycles. Consumer spending and interest rates, for example, can greatly impact the industrial production that drives demand for these companies’ offerings.

Competitors offering similar products include Snap-On (NYSE:SNA), IDEX (NYSE:IEX), and Graco (NYSE:GGG).

Reviewing a company’s long-term sales performance reveals insights into its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Thankfully, Chart’s 27.5% annualized revenue growth over the last five years was incredible. Its growth surpassed the average industrials company and shows its offerings resonate with customers, a great starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Chart’s annualized revenue growth of 53.1% over the last two years is above its five-year trend, suggesting its demand was strong and recently accelerated.

We can dig further into the company’s revenue dynamics by analyzing its backlog, or the value of its outstanding orders that have not yet been executed or delivered. Chart’s backlog reached $5.14 billion in the latest quarter and averaged 41.6% year-on-year growth over the last two years. Because this number is lower than its revenue growth, we can see the company fulfilled orders at a faster rate than it added new orders to the backlog. This implies Chart was operating efficiently but raises questions about the health of its sales pipeline.

This quarter, Chart grew its revenue by 5.3% year on year, and its $1.00 billion of revenue was in line with Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 13% over the next 12 months, a deceleration versus the last two years. Still, this projection is noteworthy and suggests the market sees success for its products and services.

All else equal, we prefer higher gross margins because they usually indicate that a company sells more differentiated products and commands stronger pricing power.

Chart’s unit economics are better than the typical industrials business, signaling its products are somewhat differentiated through quality or brand. As you can see below, it averaged a decent 30.6% gross margin over the last five years. Said differently, Chart paid its suppliers $69.42 for every $100 in revenue.

This quarter, Chart’s gross profit margin was 33.9%, up 2.1 percentage points year on year. Chart’s full-year margin has also been trending up over the past 12 months, increasing by 2.2 percentage points. If this move continues, it could suggest better unit economics due to more leverage from its growing sales on the fixed portion of its cost of goods sold (such as manufacturing expenses).

Chart has been an efficient company over the last five years. It was one of the more profitable businesses in the industrials sector, boasting an average operating margin of 12.2%.

Analyzing the trend in its profitability, Chart’s operating margin rose by 7.3 percentage points over the last five years, as its sales growth gave it immense operating leverage.

In Q1, Chart generated an operating profit margin of 15.2%, up 3.3 percentage points year on year. The increase was encouraging, and because its operating margin rose more than its gross margin, we can infer it was more efficient with expenses such as marketing, R&D, and administrative overhead.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Chart’s EPS grew at an astounding 28.9% compounded annual growth rate over the last five years, higher than its 27.5% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

We can take a deeper look into Chart’s earnings to better understand the drivers of its performance. As we mentioned earlier, Chart’s operating margin expanded by 7.3 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its higher earnings; taxes and interest expenses can also affect EPS but don’t tell us as much about a company’s fundamentals.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Chart, its two-year annual EPS growth of 38.9% was higher than its five-year trend. We love it when earnings growth accelerates, especially when it accelerates off an already high base.

In Q1, Chart reported EPS at $1.86, up from $1.19 in the same quarter last year. This print beat analysts’ estimates by 1.8%. Over the next 12 months, Wall Street expects Chart’s full-year EPS of $8.88 to grow 45.5%.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Chart’s demanding reinvestments have drained its resources over the last five years, putting it in a pinch and limiting its ability to return capital to investors. Its free cash flow margin averaged negative 32.1%, meaning it lit $32.11 of cash on fire for every $100 in revenue. This is a stark contrast from its operating margin, and its investments in working capital/capital expenditures are the primary culprit.

Taking a step back, we can see that Chart failed to improve its margin during that time. It may have ticked higher more recently, but shareholders are likely hoping for its margin to at least revert to its historical level.

Chart burned through $80.1 million of cash in Q1, equivalent to a negative 8% margin. The company’s cash burn slowed from $141.2 million of lost cash in the same quarter last year.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Although Chart has shown solid business quality lately, it historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 5.4%, somewhat low compared to the best industrials companies that consistently pump out 20%+.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Fortunately, Chart’s ROIC averaged 3.7 percentage point increases over the last few years. its rising ROIC is a good sign and could suggest its competitive advantage or profitable growth opportunities are expanding.

Chart reported $296.2 million of cash and $3.73 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $1.03 billion of EBITDA over the last 12 months, we view Chart’s 3.3× net-debt-to-EBITDA ratio as safe. We also see its $164.7 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We were impressed by Chart’s optimistic full-year EBITDA guidance, which blew past analysts’ expectations. We were also glad its backlog outperformed Wall Street’s estimates. On the other hand, its revenue was in line. Zooming out, we think this was a solid quarter. The stock traded up 2.2% to $137.75 immediately following the results.

Updated: July 7, 2025 at 10:07 PM EDT

When considering an investment in Chart, investors should account for its valuation and business qualities as well as what’s happened in the latest quarter.

There are several reasons why we think Chart is a great business. For starters, its revenue growth was exceptional over the last five years. And while its relatively low ROIC suggests management has struggled to find compelling investment opportunities, its backlog growth has been marvelous. On top of that, Chart’s expanding operating margin shows the business has become more efficient.

Chart’s P/E ratio based on the next 12 months is 12.6x. Looking at the industrials landscape today, Chart’s fundamentals really stand out, and we like it at this price.

Wall Street analysts have a consensus one-year price target of $208.22 on the company (compared to the current share price of $171.80), implying they see 21.2% upside in buying Chart in the short term.