Linde plc (LIN) 2024 Q2 Earnings Call Summary
August 2, 2024 
Linde plc (LIN)
| Market Cap | 0.21T |
|---|---|
| Beta | |
| P/E | 39.75452774136047 |
| EPS | 12.247158441111395 |
| Dividend | 0 |
| Dividend Yield | 0.00% |
Optimistic Highlights
Record Financial Performance: Linde achieved new highs in the second quarter with EPS of $3.85, operating margins of 29.3%, and return on capital of 25.7%, showcasing the company's ability to deliver high-quality growth despite global industrial stagnation.
Volume Growth and Market Resilience: Despite flat year-on-year volume trends, Linde experienced a 3% sequential volume growth, indicating organic volume improvements in certain regions and a robust response to market challenges.
Strong End Market Trends: Consumer-related end markets, especially food and beverage, showed strong growth at 8% over the prior year. Electronics sales grew by 7% sequentially and year-over-year, driven by project backlog start-ups and base growth in the U.S. and Asia.
Project Backlog Execution: Linde successfully executed on an $8 billion project backlog, positioning the company for future growth. Notably, the start-up of Phase 1 supply system in Phoenix, Arizona for TSMC was highlighted.
Capital Allocation and Shareholder Value: Linde returned $3.8 billion to shareholders and invested $2.3 billion into the business, adhering to a disciplined capital policy while maintaining a single A credit rating.
Pessimistic Highlights
Industrial Activity Challenges: The global industrial macro remains challenging, with flat year-on-year volume trends and no meaningful economic recovery assumed in the guidance.
Healthcare Segment Pruning: Healthcare is down 1% from the prior year and flat sequentially, primarily due to rationalizing home care products and service offerings that don't meet business criteria, especially in the United States.
Economic Uncertainty: Despite Linde's robust performance, the company remains cautious, not assuming any meaningful economic recovery in the guidance due to the uncertain environment.
Company Outlook
- Third Quarter and Full Year Guidance: For Q3 2024, Linde expects EPS in the range of $3.82 to $3.92, representing 6% to 9% growth excluding a 1% FX headwind. The full-year guidance is updated to $15.40 to $15.60, indicating 9% to 11% growth excluding a 1% FX headwind.
Q & A Highlights
Q: Can Linde continue driving 10%-plus earnings growth in a no-growth environment? (Michael Leithead, Barclays)
A: Linde has consistently delivered EPS growth through industrial recessions by managing ahead of the curve, leveraging a robust EPS algorithm, and taking proactive management actions. The company remains confident in its ability to deliver 10%-plus EPS growth. (Sanjiv Lamba)
Q: Why wouldn't we see volume growth for Linde in Q3 year-over-year? (David Begleiter, Deutsche Bank)
A: While year-over-year comparisons may show neutral to positive volume growth due to easier comps, Linde's guidance assumes no macro improvement on a sequential basis. The company plans for the worst but hopes for the best. (Matt White)
Q: What's driving the sequential acceleration in pricing within the Americas? (Josh Spector, UBS)
A: Pricing in the Americas remains robust, driven by management actions. The trend is consistent with past performance, with positive pricing movements in both the U.S. and Latin America, despite deflationary pressures in China. (Sanjiv Lamba)