Company Reports

Air Liquide benefits from operating in an industry with a very favorable structure. Despite selling industrial gases, which are essentially commodities, public industrial gas companies have consistently delivered lucrative returns because of their economic moats. Industrial gases typically account for a fraction of customers’ costs but are a vital input to ensure uninterrupted production. As such, customers are often willing to pay a premium and sign long-term contracts to ensure their businesses are running smoothly. Long-term contracts and high switching costs contribute to industrial gas producers’ moats, helping them generate a predictable cash flow stream and lucrative returns.

Wide-moat-rated Air Liquide reported solid first-quarter results, featuring 2% year-over-year comparable sales growth. Results varied by region, as comparable sales increased by 6% in the Americas and 11% in the Middle East and Africa but decreased by 1% in Asia Pacific and 2% in Europe. We are maintaining our EUR 185 fair value estimate given that nothing in the industrial gas firm's earnings release materially alters our long-term outlook. We see the name as fairly valued at current levels.

After taking a fresh look at industrial gas firms, we are upgrading our moat ratings for Air Liquide, Air Products, and Linde to wide from narrow, based on switching costs and intangible assets. The moat upgrade boosts our fair value estimates to EUR 185 from EUR 162 for Air Liquide, to $307 from $288 for Air Products, and to $425 from $398 for Linde.

Air Liquide benefits from operating in an industry with a very favorable structure. Despite selling industrial gases, which are essentially commodities, public industrial gas companies have consistently delivered lucrative returns because of their economic moats. Industrial gases typically account for a fraction of customers’ costs but are a vital input to ensure uninterrupted production. As such, customers are often willing to pay a premium and sign long-term contracts to ensure their businesses are running smoothly. Long-term contracts and high switching costs contribute to industrial gas producers’ moats, helping them generate a predictable cash flow stream and lucrative returns.

Narrow-moat-rated Air Liquide ended 2023 on a strong note, as full-year revenue grew roughly 4% on a comparable basis and earnings per share increased nearly 12%. After rolling our model forward one year, we’ve raised our fair value estimate to EUR 162 per share from EUR 150 to reflect our more optimistic midcycle operating margin assumptions as well as the time value of money.

Air Liquide benefits from operating in an industry with a very favorable structure. Despite selling industrial gases, which are essentially commodities, public industrial gas companies have consistently delivered lucrative returns because of their economic moats. Industrial gases typically account for a fraction of customers’ costs but are a vital input to ensure uninterrupted production. As such, customers are often willing to pay a premium and sign long-term contracts to ensure their businesses are running smoothly. Long-term contracts and high switching costs contribute to industrial gas producers’ moats, helping them generate a predictable cash flow stream and lucrative returns.

We’ve raised our fair value estimate for narrow-moat-rated Air Liquide to EUR 150 from EUR 148 following its third-quarter earnings, mostly due to time value of money. Air Liquide grew its third-quarter comparable sales by roughly 2% from the prior-year period. We view the stock as fairly valued at current levels, with shares in 3-star territory.

Air Liquide benefits from operating in an industry with a very favorable structure. Despite selling industrial gases, which are essentially commodities, public industrial gas companies have consistently delivered lucrative returns because of their economic moats. Industrial gases typically account for a fraction of customers’ costs but are a vital input to ensure uninterrupted production. As such, customers are often willing to pay a premium and sign long-term contracts to ensure their businesses are running smoothly. Long-term contracts and high switching costs contribute to industrial gas producers’ moats, helping them generate a predictable cash flow stream and lucrative returns.

Narrow-moat-rated Air Liquide’s second-quarter comparable sales increased by 4% from the prior-year period, with broad-based growth across all regions and business lines, except for large industries. We’ve raised our fair value estimate to EUR 148 from EUR 145, which reflects our slightly more optimistic operating margin assumptions and the time value of money.

Air Liquide benefits from operating in an industry with a very favorable structure. Despite selling industrial gases, which are essentially commodities, public industrial gas companies have consistently delivered lucrative returns because of their economic moats. Industrial gases typically account for a fraction of customers’ costs but are a vital input to ensure uninterrupted production. As such, customers are often willing to pay a premium and sign long-term contracts to ensure their businesses are running smoothly. Long-term contracts and high switching costs contribute to industrial gas producers’ moats, helping them generate a predictable cash flow stream and lucrative returns.

Narrow-moat-rated Air Liquide started 2023 with a strong first quarter, with growth in all regions and business lines except for large industries, though the latter showed signs of sequential recovery. We’ve increased our fair value estimate to EUR 145 from EUR 140, driven by our slightly more optimistic revenue growth projections as well as time value of money.

Air Liquide benefits from operating in an industry with a very favorable structure. Despite selling industrial gases, which are essentially commodities, public industrial gas companies have consistently delivered lucrative returns because of their economic moats. Industrial gases typically account for a relatively small fraction of customers’ costs but are a vital input to ensure uninterrupted production. As such, customers are often willing to pay a premium and sign long-term contracts to ensure their businesses are running smoothly. Long-term contracts and high switching costs contribute to industrial gas producers’ moats, helping them generate a predictable cash flow stream and lucrative returns.

We are maintaining our EUR 140 fair value estimate for narrow-moat-rated Air Liquide as nothing in its fourth-quarter earnings release materially alters our long-term outlook for the firm. Despite a challenging macroeconomic environment, the industrial gas firm grew its full-year 2022 comparable revenue and EPS both by 7% from the prior year. We see the name as appropriately valued at current levels, with shares trading in 3-star territory.

Air Liquide benefits from operating in an industry with a very favorable structure. Despite selling industrial gases, which are essentially commodities, public industrial gas companies have consistently delivered lucrative returns because of their economic moats. Industrial gases typically account for a relatively small fraction of customers’ costs but are a vital input to ensure uninterrupted production. As such, customers are often willing to pay a premium and sign long-term contracts to ensure their businesses are running smoothly. Long-term contracts and high switching costs contribute to industrial gas producers’ moats, helping them generate a predictable cash flow stream and lucrative returns.

We are maintaining our EUR 140 fair value estimate for narrow-moat-rated Air Liquide after the industrial gas firm reported solid third-quarter results despite a slowdown in large industries volumes in Europe. We see the name as appropriately valued at current levels, with shares trading in 3-star territory.

Air Liquide benefits from operating in an industry with a very favorable structure. Despite selling industrial gases, which are essentially commodities, public industrial gas companies have consistently delivered lucrative returns because of their economic moats. Industrial gases typically account for a relatively small fraction of customers’ costs but are a vital input to ensure uninterrupted production. As such, customers are often willing to pay a premium and sign long-term contracts to ensure their businesses are running smoothly. Long-term contracts and high switching costs contribute to industrial gas producers’ moats, helping them generate a predictable cash flow stream and lucrative returns.

Narrow-moat-rated Air Liquide posted a 5% year-over-year increase in first-half EPS, from EUR 2.38 to EUR 2.50. We’ve modestly increased our fair value estimate for Air Liquide, to EUR 140 from EUR 138, mostly due to time value of money. We view the stock as appropriately valued at current levels, with shares trading in 3-star territory.

Air Liquide benefits from operating in an industry with a very favorable structure. Despite selling industrial gases, which are essentially commodities, public industrial gas companies have consistently delivered lucrative returns because of their economic moats. Industrial gases typically account for a relatively small fraction of customers’ costs but are a vital input to ensure uninterrupted production. As such, customers are often willing to pay a premium and sign long-term contracts to ensure their businesses are running smoothly. Long-term contracts and high switching costs contribute to industrial gas producers’ moats, helping them generate a predictable cash flow stream and lucrative returns.

Air Liquide benefits from operating in an industry with a very favorable structure. Despite selling industrial gases, which are essentially commodities, public industrial gas companies have consistently delivered lucrative returns because of their economic moats. Industrial gases typically account for a relatively small fraction of customers’ costs but are a vital input to ensure uninterrupted production. As such, customers are often willing to pay a premium and sign long-term contracts to ensure their businesses are running smoothly. Long-term contracts and high switching costs contribute to industrial gas producers’ moats, helping them generate a predictable cash flow stream and lucrative returns.

Air Liquide benefits from operating in an industry with a very favorable structure. Despite selling industrial gases, which are essentially commodities, public industrial gas companies have consistently delivered lucrative returns because of their economic moats. Industrial gases typically account for a relatively small fraction of customers’ costs but are a vital input to ensure uninterrupted production. As such, customers are often willing to pay a premium and sign long-term contracts to ensure their businesses are running smoothly. Long-term contracts and high switching costs contribute to industrial gas producers’ moats, helping them generate a predictable cash flow stream and lucrative returns.