EUR 850.00 For Business Accounts Only

Morningstar | Linde Allowed to Integrate With Praxair, Reports Preliminary 4Q Results; Maintaining FVE

Linde announced that the Federal Trade Commission has lifted its hold separate order after the narrow-moat industrial gas producer completed required divestments, selling its U.S. hydrogen and carbon monoxide business to Matheson. Linde and Praxair will now be allowed to integrate their businesses, creating the largest industrial gas company in the world.

Linde also provided adjusted pro forma results for 2018 for the two companies combined. The company delivered sales of $28.1 billion (a 5% year-over-year increase) and diluted EPS of $6.19 (an 8% year-over-year increase). Management expects adjusted EPS to grow 8%-12% in 2019 despite slower revenue growth than in 2018. The firm’s backlog remains strong, including $5.5 billion in engineering and $3.5 billion in gases, the latter benefiting from robust demand in the Asian electronics and U.S. Gulf Coast chemicals end markets.

The industrial gas firm announced a 6% increase in its annual dividend, from $3.30 to $3.50 per share. Additionally, management plans to spend roughly $10 billion on share repurchases over the next two years (over 10% of the company’s current market capitalization), including a squeeze-out of Linde AG minority shareholders.

As the pro forma 2018 results were roughly in line with our expectations, we do not anticipate making any material changes to our $173 per share fair value estimate at this time, and we remain optimistic about the company’s long-term prospects. We will update our model when Linde files its 10-K later this month.