The global economy’s shift to sustainable energy has drawn investors’ attention towards cleaner energy sources. As a result, companies involved with hydrogen value chains and fuel cell technology are getting attention. While there are still challenges in scalability and cost-efficiency, some companies have been showing potential under the radar.
This article will look at three undervalued hydrogen stocks based on their analyst earnings growth forecast with huge potential to carve their share from this sector that could grow exponentially.
Linde plc (LIN)
When it comes to long-term investing in hydrogen stocks, one of the most popular names in many investors’ lists is the industrial gas and engineering leader Linde plc (NASDAQ:LIN). The company develops various methods of efficiently compressing and safely refueling hydrogen. LIN has been making strategic partnerships with various companies to expand its client base further, with clients like Celanese and Steel Authority of India Limited. Its estimated earnings growth rate YoY is currently at 10.76%—rare for a company of its size.
Linde’s Q3 in 2023 pointed to strong growth and resilience despite some challenges. Sales were down 7% YoY, but its underlying sales are up 3%, and adjusted operating profit increased by 15%. In addition, adjusted EPS grew 17% YoY, and the full-year adjusted EPS forecast was raised to a 14% to 15% growth, higher than analyst EPS growth estimates. Operating margins expanded 550 basis points even with a 4% decline in its cash flow generation.
Linde is confident with its upward trajectory and expects adjusted diluted EPS to rise by 7% to 10% for the fourth quarter and 14% to 15% for the entire year. With a strong track record of creating long-term shareholder value, margin improvement, and strategic direction, we feel the company has it’s place our our list of undervalued hydrogen stocks for any would-be investor.
Chart Industries, Inc. (GTLS)
The hydrogen supply chain comprises various moving parts, each providing opportunities as more and more organizations transition to renewables. Chart Industries, Inc. (NYSE:GTLS), an equipment provider for clean energy operations, can exploit this increased demand.
The company manufactures engineered cryogenic equipment for various applications in the energy and gas sector. GTLS operates in different segments. Heat Transfer Systems handle engineered equipment and systems responsible for industrial gas and hydrocarbon purification, liquefaction, and purification. Cryo Tank Solution produces micro bulk, bulk, and mobile equipment supplies for storage, distribution, and industrial applications. Specialty Product provides hydrogen, CO2 capture, laser, and other specialty product segments. Repair, Services & Leasing (RSL) offers maintenance, repair, and installation services.
GTLS’s 3rd quarter financials ended with strong numbers across various metrics. This includes a $4.1 billion backlog and orders, primarily driven by a significant RSL and Specialty Products backlog. The company also reported a record $1.13 billion in orders and $297.9 million in commercial synergies. Reported sales grew from $412.10 million to $897.90 million, and gross profit reached $276.2 million, increasing by 164% from $104.60 million YoY. On the other hand, GTLS recently lowered its full-year sales guidance from $3.80 billion on the high end to $3.50 billion. This is mainly due to accelerated American Fan, Cryo Diffusion, and Cofimco divestitures. However, GTLS maintains its original EPS forecast of $6.05 to $6.25.
Chart Industries’ growth prospects cement it’s place on our list of undervalued hydrogen stocks. In fact, analysts project a 27.54% growth rate for the company, highlighting its excellent potential for further expansion.
Fluor Corporation (FLR)
The transition towards green and sustainable energy, bolstered by COP28, is accelerating, and Fluor Corporation (NYSE:FLR) is a strong partner for companies looking for clean energy solutions. Fluor’s main operating segments are the energy solution that provides asset decarbonization, carbon capture, hydrogen, nuclear, and other low-carbon energy sources; urban solutions for infrastructure management services, manufacturing, and professional staffing; and mission solution for its focus on federal agencies in the government, like the Department of Energy, Defense, and Intelligence agencies.
FLR’s Q3’23 showcased solid results. The quarter’s net earnings attributable to Fluor was $206 million, a significant 836.36% jump from the reported $22 million YoY. Diluted EPS ended at $1.15, while adjusted diluted EPS was $1.02. Revenue for the quarter also reached $4.0 billion, alongside new awards that amount to $5.0 billion, contributing to a healthy backlog of $26 billion. This strong financial performance led to management updating its full-year guidance. Adjusted EPS is expected to reach between $2.50 and $2.70, a sizable increase from the previous $2.00 to $2.30 range per diluted share. The company also increased its expected adjusted EBITDA range from $500 million to $600 million to just around $600 million.
Analyst earnings estimates target the company’s earnings growth rate at 30.23%, signifying a strong earnings potential and growth in the future. Investors looking to buy hydrogen stocks might want to examine FLR’s focus on profitability, positive guidance, and ability to provide robust results.
On the date of publication, Rick Orford did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.