This Industrial-Gas Giant’s Stock Is Steady in a Volatile Market. It Also Scores High on ESG.

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Despite dealing in chemicals and carbon-emitting natural resources, Linde has respectable ESG ratings. Here, one of its hydrogen tanker trucks makes a delivery at a railway refueling station in Salzgitter, Germany

Krisztian Bocsi/Bloomberg

In a world where even the most reliable of big-name stocks are vulnerable to dips in the market, investors may want to consider companies with a track record of steady returns.

Linde (ticker: LIN) is one of three major industrial-gas makers, alongside Air Products & Chemicals (APD) and Air Liquide (AI.France). The relative scarcity of such providers ensures that Linde is able to pass on higher raw materials costs, and the diversity of its projects makes it less susceptible to swings in the economic outlook.

What’s more, despite dealing in chemicals and carbon-emitting natural resources, Linde scores highly in the MSCI environmental, social, and governance rating. That’s due to the kinds of projects Linde works on—carbon capture and storage, for example. The company also has ambitious plans to reduce the greenhouse gases it emits and to double its purchase of renewable energy by 2028.

“Linde has generated steady earnings growth, high levels of cash flow and attractive returns for some time,” says Sebastian Bray, an analyst at Berenberg in London. “This is a reasonably safe place to park your money.”

Linde employs 72,327 staff and has a market value of $166 billion. It operates all over the world and, in addition to selling industrial gases, offers engineering services. The company fetches 26 times this year’s expected earnings and is valued at a 60% premium to its peers. Shares have slipped 4% this year to a recent $334. Berenberg’s Bray has a target price of about $360 and rates the shares a Buy.

“The reason they’re more expensive than many peers is that the chances of unexpected [hits to earnings] are quite low,” Bray says.

The company traces its roots back to 1879, when inventor Carl von Linde assembled a group to make machines for refrigeration in Wiesbaden, Germany. One of the first investors was a Rhineland brewer who saw the potential to expand his market by keeping beers cold. In 1907, Linde added a U.S. subsidiary. That business was confiscated by the government in the World War I, but would, many years and mergers later, become Praxair.

Praxair and Linde merged in 2018 to create Linde, the world’s biggest maker of industrial gases. It moved its domicile from Germany to Ireland, with its headquarters now in Guildford, U.K., just outside of London. Its shares are still listed in New York and Frankfurt.

The company’s projects range from medical oxygen to producing hydrogen for clean fuels. It serves the chemicals, electronics, manufacturing, and food-and-beverage industries. In April, Linde announced a long-term agreement with a “major space-launch company in Florida” to provide liquid oxygen and nitrogen from its air-separating plant there.

Linde reported diluted earnings per share of $2.30 for the first quarter of 2022, up 24% from a year earlier. The company expects earnings per share between $2.90 and $3 for the second quarter, as much as 11% higher than the previous year. Chief Executive Officer Sanjiv Lamba hailed the record return on capital for the quarter, at 18.9%. “The business model continues to deliver in any environment, demonstrating resiliency during economic downturns and significant growth during the recovery,” he said when earnings were released.

The company increased its margins in the first quarter, despite higher input costs from soaring energy and commodities prices.

With the S&P 500 index on the brink of a bear market this year, and riskier shares on the Nasdaq down even further, Linde can offer a strong defensive investment with environmental credentials.

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