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Chart Industries, Inc. Stock Up 17% on Earnings: Here's What You Need to Know

By Jason Hall – Feb 25, 2016 at 1:27PM

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The cryogenic gas processing equipment maker reported much better Q4 results today than the market was expecting, and guidance that's not too shabby, either.


Image source: Chart Industries.

What: Shares of Chart Industries (GTLS 0.56%) are up 16.8% at 11:05 a.m. ET on Feb. 25, following the company's 2015 full-year and fourth-quarter earnings release before market open today. 

So what: Chart reported financial results for the fourth quarter that killed analyst estimates. Wall Street expected a consensus average of $0.02-per-share adjusted earnings, while Chart delivered adjusted earnings per share of $0.19. 

On a GAAP basis -- i.e., before making adjustments due to one-time items -- Chart reported a fairly large net loss of $230 million, or minus $7.52 per share in the quarter and minus $6.66 per share for the full year. But this is exactly the kind of situation where understanding some basic accounting, and the difference between noncash impairments and actual cash losses, is important. 

In the fourth quarter, Chart took $253.5 million in non-cash impairment charges, leading to a net loss on a GAAP basis of $230.1 million, or minus $7.54 per share. And while asset impairment isn't a good thing, since it means that the company is devaluing the cash-generating value of part of its business, it's not a cash loss. 

As a matter of fact, Chart's balance sheet actually improved in the fourth quarter. The company ended the year with $123.7 million in cash, up from $82.5 million at the end of the third quarter, and only slightly more long-term debt, up $3 million to $215.6 million.

Now what: Chart management is forecasting for sales between $900 million and $1 billion in 2016 and earnings per share between $0.50 and $1.00. That would be a slight decline from the $1.04 billion in revenue from 2015, but far from a free fall. 

Chart has also taken some major strides to improve its cost structure going forward. When adjusted for the asset impairments above, operating expenses were lower in 2015 than in 2014, and with the company having reduced head count by 20% heading into 2016, those costs should fall even further. And while having to cut staff isn't a good thing, management has made the hard choices to close facilities and position the company to ride out the downturn in demand for energy-related equipment, and emerge in good shape when the recovery eventually starts. 

Stay tuned for more in-depth coverage of Chart's earnings in the next couple of days.

Jason Hall owns shares of Chart Industries. The Motley Fool owns shares of and recommends Chart Industries. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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