Shares of Chart Industries (GTLS 1.16%) crashed today, having tumbled 10.7% as of 11:35 a.m. EDT after releasing third-quarter numbers that fell short of analysts' estimates. But should you really be worried, given Chart Industries' record backlog and an encouraging outlook for 2022?
Chart Industries manufactures a wide range of servicing equipment for the energy and industrials sectors under four segments: cryogenic tank solutions; heat transfer systems; repair, service, and leasing; and specialty products.
Here are some notable numbers from Chart Industries' third-quarter earnings report:
- Orders up 33%, driving year-to-date backlog up 53% to a record $1.2 billion
- Sales up 20% year over year to $328.3 million
- Net income down 31% to $14.9 million
If you're wondering why Chart Industries' net income declined despite such strong top-line growth, here's what happened: Although the company increased prices for most products last quarter, those increases weren't enough to offset the rise in costs for raw material, containers, and freight.
Management expects margins to improve from the fourth quarter as demand remains strong. Year to date, Chart Industries has booked orders for 449 trailers, a number that's up 34% year over year.
The market is miffed that Chart Industries now expects 2021 revenue to be worth only $1.31 billion to $1.33 billion versus the $1.38 billion to $1.43 billion it projected earlier. Management, however, stressed the lower guidance is not because of any loss in revenue but only because some of the revenue the company expected to recognize in the third quarter will shift to 2022.
That also explains why the company is upbeat about 2022: It expects $1.7 billion to $1.85 billion in revenue next year. Also, the guidance doesn't include big LNG contracts that Chart Industries expects to bag. For example, it expects three big LNG Gulf Coast projects, including one each from Tellurian and Cheniere Energy, to advance to the "final investment decision" stage in 2022, which is when a company sanctions a project and awards contracts. Contracts from all three could mean orders worth more than $800 million for Chart Industries.
In short, Chart Industries is evidently growing, and the drop in its stock price today doesn't indicate a problem at the company but merely reflects the market's shortsightedness.