Morgan Stanley sees Chart Industries stock value amid positive energy transition outlook By Investing.com
On Monday, Morgan Stanley was upgraded Chart Industries (NYSE:) stock from Equalweight to Overweight and established a $175.00 target price. The restructuring reflects a significant shift in response to changing oil market conditions and the company's focus on less oil-dependent sectors.
The company acknowledged the impact of perceived low oil prices on the oilfield services and equipment (OFSE) sector, noting that this market is heavily influenced by oil prices, demand, and capital costs. However, Chart Industries' limited oil exposure, less than 5% of 'traditional energy' revenue, positions the company well in the current environment.
Chart Industries' core portfolio consists of , energy conversion, and renewable applications, areas where Morgan Stanley maintains a positive outlook. This development follows the company's merger with Howden, which was completed around March 2023. The merger has contributed to the sustainability and growth of Chart Industries' portfolio.
When Morgan Stanley resumed coverage of Chart Industries earlier this year, the firm saw value in the company's post-merger portfolio but considered the stock to be in line with small-to-midsize (SMID) companies based on key metrics like these. It reviews potential vision and risk reward. This resulted in an Equalweight measure.
The current move to Overweight indicates a reassessment of Chart Industries' position relative to the broader OFSE. Morgan Stanley now finds Chart Industries very attractive based on reviews, valuations, and risk-reward perspective compared to other companies in its coverage area.
In other recent news, Stifel maintained a buy rating on Chart Industries, despite lowering the company's guidance due to delayed revenue recognition. The company believes that the approved start-up of Venture Global's CP2 LNG project will improve Chart Industries' cash flow for the remainder of the year.
Similarly, Citi lowered its price target for Chart Industries from $210 to $190 due to backlog turnaround challenges, while maintaining a buy rating. The adjustment came after Chart Industries' second-quarter earnings fell as expected, leading to a decrease in full-year 2024 EBITDA guidance.
These changes follow Chart Industries' announcement of a 12% increase in orders to $1.16 billion and an 18.8% increase in sales to $1.04 billion in Q2 2024 earnings. Despite these strong operating numbers, the company's full-year sales 2024 is expected to decline in both the consensus estimate and the company's own guidance.
These recent events suggest that although Chart Industries is facing some challenges, analysts from Stifel and Citi still see strength in the company's future performance.
InvestingPro Insights
Given Morgan Stanley's latest upgrade for Chart Industries, a look at InvestingPro's data reveals a company poised to grow with strong revenue growth over the past twelve months from Q2 2024. Revenue growth stands at an impressive 70.25%, with gross profit margin of 32.42%, showing strong performance. Despite a critical P/E ratio of 194.42, the adjusted P/E ratio for the last twelve months notes a more reasonable valuation of 33.74.
Two InvestingPro tips that are particularly relevant in the context of the article are the expectation of net income growth this year and the expectation of sales growth in the current year. These details are consistent with Morgan Stanley's optimistic view of Chart Industries' future, especially considering the company's strategic shift toward natural gas, energy transition, and renewable applications. For investors looking for more detailed analysis, InvestingPro offers additional tips on Chart Industries including analyst earnings reviews and company earnings forecasts.
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