The exciting energy transition market isn't just relegated to electrification. The concept of a hydrogen-fueled economy is on the rise, especially after the U.S. government awarded $7 billion in funding for seven regional hydrogen hubs across the U.S. in October of last year.

In fact, hydrogen is gaining popularity across the world, especially for industries that are hard to electrify like heavy industry or long-haul trucking. That's because hydrogen is a zero-carbon fuel that only emits water as a byproduct, and it's also a baseload fuel, which means it can be stored and transported. That's unlike solar and wind, which only produce power when the sun is shining or wind is blowing.

One company feeding the nascent hydrogen economy is equipment supplier Chart Industries (GTLS -0.20%). And while the company had a better than-expected earnings report last month, it's received a solid string of positive news in March as well.

A debt upgrade, followed by an equity upgrade

Chart is still well off its late 2022 highs, when it announced the acquisition of similarly sized peer Howden from a private equity firm. Chart used a large amount of debt to buy Howden, and its stock plunged in the aftermath.

However, it appears from last quarter's earnings report that one year after announcing the Howden deal, Chart is executing on its promised revenue and cost synergies. On March 11, ratings agency S&P Global upgraded Chart's secured debt from a "B+" rating to "BB-", and its unsecured notes from a "B" to a "B+".

That may not seem like such a big deal. After all, a BB- rating is still a non-investment grade rating. However, crossing from B+ to BB- does bring Chart's secured debt up from a "highly speculative" category to "non-investment grade speculative." The category upgrade means Chart could potentially see greater demand for its debt, and lower costs of refinancing.

It also means the threat of the debt load, which caused the stock to plunge in the first place, is lessening. And that means less risk for equity holders. On that note, Chart's stock also received an upgrade last Tuesday from analysts at UBS. In upgrading Chart from a "Neutral" to "Buy" rating, UBS analyst Manav Gupta sees Chart bringing in $600 million in free cash flow this year, lowering its debt from $3.7 billion to $3.1 billion by the end of 2024. Once Chart has paid off a sufficient amount of debt, Gupta says Chart could see its multiple double or even triple.

You read that right -- a double or triple, just from margin expansion alone. And that makes sense, as Chart's stock was essentially cut in half when it announced the Howden acquisition. But given that Chart now benefits from Howden's earnings, the combined company actually has more earnings power than before, so its valuation multiple actually compressed by "three turns," according to Gupta. Thus, the market getting over its fears over Chart's debt load would allow the stock to undo its post-acquisition multiple compression, leading to healthy gains for the stock.

GTLS PE Ratio (Forward) Chart

GTLS PE Ratio (Forward) data by YCharts

Chart lands two big hydrogen orders

While Chart had been known as an equipment supplier primarily to the oil and gas, LNG, and traditional industrial gas markets in the past, it is quickly becoming a leader in the high-growth hydrogen economy as well.

Just last week, Chart announced two big hydrogen wins. On Monday, March 18, Chart announced it was awarded a large hydrogen equipment order from Element Resources Inc., which is building out a 20,000 ton-per-year green hydrogen facility in Lancaster, CA. In the press release, Element said, "we are pleased to have a supplier that designs, engineers and builds in-house essentially all of the hydrogen liquefaction, storage and handling equipment which significantly simplifies the procurement, construction and operation of the plant and facilities."

This statement speaks to Chart's current competitive advantage and an endorsement of the Howden deal, which gave Chart a complete portfolio of both sitting and rotating hydrogen equipment, thereby allowing it to provide these easy "turnkey" solutions for customers rather than just being a supplier of one-off pieces of equipment.

Then on Wednesday, March 20, Chart announced a collaboration with GasLog LNG Services Ltd, a liquefied natural gas transporter, to study the buildout of a global liquid hydrogen supply chain. In particular, the collaboration will look at the export of hydrogen from plants in the Middle East to export markets in Europe and Asia.

While this announcement was just a study, GasLog is a big leader in the large global LNG trade. So, the fact that Chart and GasLog are collaborating on an emerging hydrogen ecosystem could signal a very large international hydrogen trade market in the future. Chart's CEO Jill Evanko noted in the release, "We see a significant momentum shift from export developers discussing ammonia supply chains twelve months ago to LH2 supply chains today."

Hydrogen tanks against a blue sky.

Image source: Getty Images.

As long as Chart hits guidance, its stock is cheap

In its recent earnings report, Chart forecast adjusted earnings per share between $12 and $14 this year. While stock has had a nice rise recently, it still only trades at $159, or 11 to 13 times this year's earnings estimates.

That's quite cheap, and does lend some credence to the assertion Chart could see its multiple double or more if it continues to pay down its debt. In addition, Chart sees its hydrogen market opportunity growing from around $16.6 billion over the next four years to $82.5 billion by the end of this decade.

If the hydrogen market expands in the way Chart forecasts and if Chart can keep capitalizing on opportunities as it did last week, it could see vigorous earnings growth as well as multiple expansion. That would be great news for shareholders.