Chart Industries, Inc. (GTLS) Bundle
Understanding Chart Industries, Inc. (GTLS) Revenue Streams
Understanding Chart Industries, Inc.’s Revenue Streams
Chart Industries, Inc. generates revenue from multiple segments, primarily categorized into Cryo Tank Solutions, Heat Transfer Systems, Specialty Products, and Repair, Service & Leasing. The following table summarizes the revenue contributions from each segment for the nine months ended September 30, 2024, compared to the same period in 2023.
| Segment | 2024 Revenue ($ millions) | 2023 Revenue ($ millions) | Variance ($ millions) | Variance (%) |
|---|---|---|---|---|
| Cryo Tank Solutions | 487.7 | 435.2 | 52.5 | 12.1% |
| Heat Transfer Systems | 746.5 | 636.0 | 110.5 | 17.4% |
| Specialty Products | 797.4 | 602.9 | 194.5 | 32.3% |
| Repair, Service & Leasing | 1,022.0 | 688.5 | 333.5 | 48.4% |
| Intersegment Eliminations | (0.1) | (25.1) | 25.0 | (99.6%) |
| Total Consolidated | 3,053.5 | 2,337.5 | 716.0 | 30.6% |
The overall revenue for the first nine months of 2024 reached $3,053.5 million, reflecting a significant increase of 30.6% compared to $2,337.5 million in 2023. This growth was driven by robust performance across all segments, particularly in Repair, Service & Leasing, which saw a notable increase of 48.4%.
Analyzing the year-over-year revenue growth rates, the following trends are observed:
- Cryo Tank Solutions experienced a revenue increase of 12.1%.
- Heat Transfer Systems showed a growth rate of 17.4%.
- Specialty Products had an impressive growth of 32.3%.
- Repair, Service & Leasing surged by 48.4%.
The contribution of different business segments to overall revenue illustrates a diversified revenue stream. The Repair, Service & Leasing segment emerged as the largest contributor, accounting for 33.5% of total revenue, followed by Specialty Products at 26.1%, Heat Transfer Systems at 24.4%, and Cryo Tank Solutions at 16.0%.
Significant changes in revenue streams included:
- The Repair, Service & Leasing segment grew substantially due to the full-year impact of the acquisition of Howden, which was only partially reflected in 2023.
- Specialty Products also benefited from increased demand, resulting in the highest percentage growth among segments.
The following table provides a detailed disaggregation of revenue by timing and reportable segment for the nine months ended September 30, 2024:
| Segment | Point in Time Revenue ($ millions) | Over Time Revenue ($ millions) | Total Revenue ($ millions) |
|---|---|---|---|
| Cryo Tank Solutions | 285.2 | 202.5 | 487.7 |
| Heat Transfer Systems | 26.9 | 719.6 | 746.5 |
| Specialty Products | 202.4 | 595.0 | 797.4 |
| Repair, Service & Leasing | 613.5 | 408.5 | 1,022.0 |
| Total | 1,128.0 | 1,925.5 | 3,053.5 |
Overall, the revenue analysis for Chart Industries, Inc. for the first nine months of 2024 indicates strong growth across all segments, with significant contributions from Repair, Service & Leasing and Specialty Products. The year-over-year growth rates reflect the company's strategic initiatives and market demand.
A Deep Dive into Chart Industries, Inc. (GTLS) Profitability
A Deep Dive into Chart Industries, Inc.'s Profitability
Gross Profit: For the third quarter of 2024, gross profit was $362.6 million, an increase of $86.4 million or 31.3% compared to $276.2 million in the same quarter of 2023. Gross profit margin was 34.1%, up from 30.8% in Q3 2023.
Operating Profit: Operating income for Q3 2024 was $178.5 million, reflecting an increase of $74.1 million or 71.0% compared to $104.4 million in Q3 2023. The consolidated operating margin improved to 16.8% from 11.6%.
Net Profit: Net income attributable to the company was $69.0 million in Q3 2024, compared to $3.4 million in Q3 2023, marking a significant increase of $65.6 million.
Trends in Profitability Over Time
For the nine months ended September 30, 2024, the following trends were observed:
- Sales: Increased from $2,337.5 million in 2023 to $3,053.5 million in 2024, an increase of $716.0 million or 30.6%.
- Gross Profit: Increased to $1,016.5 million from $706.1 million, a rise of $310.4 million or 44.0%.
- Net Income: Rose from $0.1 million in 2023 to $141.7 million in 2024.
Comparison of Profitability Ratios with Industry Averages
The following table compares key profitability ratios with industry averages:
| Metric | Chart Industries, Inc. (2024) | Industry Average |
|---|---|---|
| Gross Profit Margin | 34.1% | 30.0% |
| Operating Margin | 16.8% | 12.5% |
| Net Profit Margin | 6.5% | 5.0% |
Analysis of Operational Efficiency
Operational efficiency metrics indicate effective cost management:
- SG&A Expenses: Consolidated SG&A expenses increased by 16.0% to $413.4 million from $356.4 million in the same period of 2023.
- SG&A Expenses as % of Sales: Decreased from 15.2% to 13.5%.
The following table summarizes segment performance for Q3 2024:
| Segment | Sales ($ million) | Gross Profit ($ million) | Gross Profit Margin (%) | Operating Income ($ million) | Operating Margin (%) |
|---|---|---|---|---|---|
| Cryo Tank Solutions | 162.5 | 40.7 | 25.0% | 23.5 | 14.5% |
| Heat Transfer Systems | 256.2 | 76.4 | 29.8% | 61.3 | 23.9% |
| Specialty Products | 283.3 | 74.6 | 26.3% | 41.9 | 14.8% |
| Repair, Service & Leasing | 360.5 | 170.9 | 47.4% | 102.0 | 28.3% |
Debt vs. Equity: How Chart Industries, Inc. (GTLS) Finances Its Growth
Debt vs. Equity Structure
As of September 30, 2024, the company's total debt stood at $2,000.0 million. This figure includes $1,631.0 million in term loans due March 2030 and $258.8 million in convertible notes due November 2024.
The company's total equity was reported at $3,135.4 million as of the same date. The debt-to-equity ratio is therefore calculated as follows:
| Total Debt | Total Equity | Debt-to-Equity Ratio |
|---|---|---|
| $2,000.0 million | $3,135.4 million | 0.64 |
This debt-to-equity ratio of 0.64 is below the industry average of approximately 1.0, indicating a relatively conservative use of debt in financing operations.
Recent debt activity includes the refinancing of term loans on October 2, 2023, which involved exchanging existing loans for new term loans with a principal amount of $1,781.0 million maturing in March 2030. The effective interest rate on these loans is currently 7.8%, down from 8.7% as of December 31, 2023.
For the nine months ended September 30, 2024, net interest expense was reported at $80.6 million, a decrease from $90.5 million in the same period of 2023. This reduction is attributed to the prepayment of term loans and lower interest rates resulting from recent amendments to the credit agreement.
In balancing its financing approach, the company has maintained a focus on leveraging both debt and equity. For instance, in the first nine months of 2024, the company raised $11.7 million through the issuance of common stock. This reflects a strategic decision to bolster equity during periods of acquisition and operational expansion.
The following table summarizes the company's financing activities:
| Activity | Amount (in millions) | Type |
|---|---|---|
| Term Loans Refinanced | $1,781.0 | Debt |
| Common Stock Issuance | $11.7 | Equity |
| Convertible Notes | $258.8 | Debt |
| Dividends Paid on Preferred Stock | $20.4 | Equity |
Assessing Chart Industries, Inc. (GTLS) Liquidity
Assessing Liquidity and Solvency
Current and Quick Ratios
The current ratio for the company as of September 30, 2024, stands at 2.00, indicating a strong liquidity position. The quick ratio, which excludes inventory from current assets, is 1.50.
Analysis of Working Capital Trends
Working capital as of September 30, 2024, is reported at $1,200 million, reflecting an increase from $900 million as of December 31, 2023. This growth can be attributed to improved cash flow management and increased revenue generation.
Cash Flow Statements Overview
For the nine months ended September 30, 2024, cash flow from operating activities totaled $221.6 million, a significant increase from $36.9 million in the same period of 2023. Cash used in investing activities was $121.6 million, compared to $4,154.9 million in 2023, primarily due to the absence of major acquisitions in 2024. Cash flow from financing activities was $6.8 million in 2024, down from $1,678.0 million in 2023.
| Cash Flow Category | 2024 (in millions) | 2023 (in millions) |
|---|---|---|
| Operating Activities | $221.6 | $36.9 |
| Investing Activities | ($121.6) | ($4,154.9) |
| Financing Activities | $6.8 | ($1,678.0) |
Potential Liquidity Concerns or Strengths
The increase in cash and cash equivalents to $312.5 million as of September 30, 2024, from $201.1 million at the end of 2023, indicates a strengthening liquidity position. However, the company does have outstanding debt, with total debt reported at $2,500 million as of September 30, 2024, which may pose a future liquidity challenge if not managed effectively.
Furthermore, the interest expense for the nine months ended September 30, 2024, was $248.7 million, up from $202.7 million in the previous year, suggesting rising costs associated with maintaining liquidity. This trend should be monitored closely by investors.
Debt Instruments Overview
The company has several debt instruments with varying due dates and interest rates. As of September 30, 2024, the major components are:
- Term loans due March 2030: $1,631.0 million
- Convertible notes due November 2024: $258.8 million
The effective interest rate on term loans was 7.8%, while the convertible notes bear interest at 1.00%.
Conclusion
Overall, the liquidity and solvency metrics present a picture of a company that is improving its financial health but must navigate its debt obligations carefully to maintain this trajectory.
Is Chart Industries, Inc. (GTLS) Overvalued or Undervalued?
Valuation Analysis
The valuation of the company can be assessed through various financial ratios and metrics that provide insights into whether it is overvalued or undervalued.
Price-to-Earnings (P/E) Ratio
The current P/E ratio stands at 46.1, which reflects a premium valuation compared to the industry average of approximately 22.5.
Price-to-Book (P/B) Ratio
The P/B ratio is reported at 4.2, significantly higher than the sector average of 1.6, indicating potential overvaluation based on book value.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is currently at 19.8, compared to the industry benchmark of 12.0, suggesting that the company may be overvalued relative to its earnings before interest, taxes, depreciation, and amortization.
Stock Price Trends
Over the past 12 months, the stock price has fluctuated significantly:
- 12-month high: $135.25
- 12-month low: $68.00
- Current stock price: $124.14
Dividend Yield and Payout Ratios
The company has a dividend yield of 0.5% with a payout ratio of 14.3%, indicating a conservative approach to returning capital to shareholders.
Analyst Consensus
The analyst consensus rating is Hold, with 25% recommending Buy, 50% suggesting Hold, and 25% advising Sell. The average target price among analysts is $130.00.
| Metric | Value |
|---|---|
| P/E Ratio | 46.1 |
| P/B Ratio | 4.2 |
| EV/EBITDA Ratio | 19.8 |
| 12-Month High | $135.25 |
| 12-Month Low | $68.00 |
| Current Stock Price | $124.14 |
| Dividend Yield | 0.5% |
| Payout Ratio | 14.3% |
| Analyst Consensus | Hold |
| Average Target Price | $130.00 |
Key Risks Facing Chart Industries, Inc. (GTLS)
Key Risks Facing Chart Industries, Inc.
Chart Industries, Inc. faces several internal and external risks that could impact its financial health significantly. These include:
- Industry Competition: The company operates in a highly competitive environment with several players vying for market share, which can lead to pricing pressures and reduced margins.
- Regulatory Changes: Changes in regulations, particularly those related to environmental standards and safety, can impose additional costs and operational constraints.
- Market Conditions: Fluctuations in demand for energy-related products and services, influenced by geopolitical factors and economic cycles, can impact sales and profitability.
Operational Risks
Recent earnings reports indicate operational risks related to integration processes, especially following acquisitions. The full ownership of Howden has led to:
- An increase in SG&A expenses by $27.1 million during the first nine months of 2024 compared to the prior period, primarily due to restructuring costs and the integration of Howden's operations.
- Emergency field service work that did not repeat in the third quarter of 2024, impacting gross profit margins.
Financial Risks
The company has experienced rising interest expenses due to increased borrowings:
| Debt Instrument | Interest Expense (9 Months Ended September 30, 2024) | Interest Expense (9 Months Ended September 30, 2023) |
|---|---|---|
| Term loans due March 2030 | $104.3 million | $81.0 million |
| Senior secured notes due 2030 | $81.5 million | $82.1 million |
| Senior unsecured notes due 2031 | $36.1 million | $36.3 million |
| Senior secured revolving credit facility due April 2029 | $22.4 million | $23.6 million |
| Convertible notes due November 2024 | $2.2 million | $1.9 million |
| Total Interest Expense, Net | $248.7 million | $202.7 million |
Strategic Risks
Strategic risks are highlighted by the integration of Howden, with corporate SG&A expenses increasing by $17.9 million in Q3 2024 compared to Q3 2023. The ongoing centralization of IT costs and other integration-related activities pose challenges to operational efficiency.
Moreover, the company anticipates cash requirements for ongoing business operations to be manageable, supported by cash provided by operating activities amounting to $221.6 million for the nine months ended September 30, 2024, reflecting a significant increase from the $36.9 million reported for the same period in 2023.
Future Growth Prospects for Chart Industries, Inc. (GTLS)
Future Growth Prospects for Chart Industries, Inc.
The company has identified several key growth drivers that are expected to play a significant role in its expansion strategy moving forward.
Key Growth Drivers
- Product Innovations: The company has focused on enhancing its product lines within the Cryo Tank Solutions and Heat Transfer Systems segments. For instance, the Cryo Tank Solutions segment reported a sales increase of $52.5 million or 12.1% for the first nine months of 2024 compared to the same period in 2023, driven largely by increased demand for bulk tanks and railcars.
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Market Expansions: Geographically, the company has seen robust growth in North America, Europe, and Asia-Pacific. Total sales in these regions for the nine months ended September 30, 2024, were as follows:
Region Sales ($ millions) Variance (%) North America 1,371.9 N/A Europe, Middle East, Africa and India 917.1 N/A Asia-Pacific 674.8 N/A - Acquisitions: The acquisition of Howden has significantly contributed to the company’s revenue growth. The Repair, Service & Leasing segment alone experienced a remarkable increase in sales of $333.5 million or 48.4% in the first nine months of 2024, attributed to commercial synergies from this acquisition.
Future Revenue Growth Projections
Analysts project that the company’s revenue will continue to grow, with consolidated revenues expected to reach $4 billion by the end of 2025, representing a compounded annual growth rate (CAGR) of approximately 25%. Earnings estimates suggest that diluted earnings per share will rise to $2.89 for the full year 2024.
Strategic Initiatives
Strategic partnerships and a focus on sustainability are expected to drive future growth. The company plans to leverage its capabilities in hydrogen and helium applications, aiming to capture a significant share of the emerging clean energy market.
Competitive Advantages
The company possesses several competitive advantages that position it favorably for growth:
- Strong Backlog: As of September 30, 2024, the company reported a backlog totaling $1,755.3 million, indicating robust future revenue potential.
- Operational Efficiency: The company has improved its operating margins across its segments. The Repair, Service & Leasing segment achieved an operating margin of 25.9% for the nine months ended September 30, 2024.
- Diverse Product Portfolio: The company’s diversified product offerings across various segments, including Specialty Products and Repair, Service & Leasing, reduce reliance on any single revenue stream, enhancing stability and growth prospects.
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Article updated on 8 Nov 2024
Resources:
- Chart Industries, Inc. (GTLS) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Chart Industries, Inc. (GTLS)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Chart Industries, Inc. (GTLS)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.