(GTLS) is a $2.7 billion global engineering company that
specializes in equipment primarily used in energy processing
applications such as liquefied natural gas (LNG) and in the
purification and storage of industrial gases for medical fields.
But its 3rd-quarter earnings report on October 31, which included a
miss and guide lower, left investors and the stock completely out
of fuel as shares dropped over 27% in the last three weeks.
Chart Industries, which was seen on the forefront of systems
required to support trucks that run on LNG, operates in three
segments: Energy and Chemicals, Distribution and Storage, and
Biomedical. The latter segment wasn't the problem area last
According to analysts at Global Hunter Securities, "GTLS printed a
disappointing quarter in issues in its two banner segments. The
D&S segment missed on the top line due to projects moving out
the door slower than anticipated and E&C missed as margins came
in lower due to pricing issues."
The Chart for Chart
After the disappointing report, the stock and its Zacks Rank tell a
story that any investor caught with a "miss and lower" quarter --
as opposed to "beat and raise" -- can relate to.
GTLS shares fell to a Zacks #5 Rank on November 5 after several
analysts revised their estimates lower. At the time, the stock was
still trading $102 and gave investors plenty of heads up to plan
their exit before dropping below $87 last week.
And GTLS actually went to Zacks #4 Rank on October 19 as some
astute analysts began lowering their numbers ahead of the company's
quarterly report. It seems the love for this company among many
investors made them reluctant to let go of their shares despite the
warnings in the revision data.
The LNG Frontier
In the past two years, I have invested in two other companies
involved in using LNG for truck fuel.
(WPRT) caught my eye in 2012 as a maker of engine conversion kits,
and not least because their "big brother" in the business was
While some companies like UPS and FedEx already run expanding
portions of their fleets with natural gas engines, the idea for all
of America's trucks to run on nat gas was popularized by infamous
energy tycoon T. Boone Pickens.
The billionaire oil man has spent several years lobbying Congress
to pass what is commonly known as the Natural Gas Act. His plan for
American energy independence and economic/environmental stability
was to have the government subsidize the conversion of 18-wheelers
from diesel to nat gas.
WPRT fortunes may have been tied to much to these big expectations
about government subsidies for truck engine conversions and the
stock has recently fallen to 18-month lows as those "nat gas
dreams" have not materialized.
Clean Energy Fuels
(CLNE), one of the leading LNG gas station operators (in part
financed by Pickens) hasn't had a much better year, with the stock
basically stuck between $12 and $14 for over 18 months since a peak
above $24 in early 2012. They remain unprofitable with EPS
estimates still trending downward.
(LNG) is the other nat gas stock I've traded this year. They are
the only company approved by the Department of Energy to export LNG
and CNG (compressed natural gas) products. They are building the
export facilities in Louisiana and shares are up over 100% this
The Future for Chart
Given this mixed landscape for LNG-centered businesses, it is no
surprise what Global Hunter had to say about Chart Industries
"The market realized the issues that led to our downgrade several
months ago: that the LNG space is highly competitive, large
projects have a tendency to slip and costs are often
underestimated. We continue to believe that the macro story is very
strong and that GTLS will participate, but we feel that is
currently priced into the stock, thus we are not moving off of our
That was their view on November 4 when they lowered EPS estimates
for Q4 and the full year 2014. They also lowered their price target
on shares then to $107 from $115.
They were joined by 9 of 12 other analysts in similar moves and
this brought down the 2013 EPS consensus to $2.95 from $3.22. The
full year 2014 consensus slipped to $4.03 from $4.39. William Blair
analysts lowered their EPS estimates but maintained their $104
While GTLS may have superior technology that will be in high demand
when the trend of nat gas trucks accelerates, right now the
earnings revisions trends are saying to find another ride.
Kevin Cook is a Senior Stock Strategist for Zacks where he runs
Follow The Money
CLEAN EGY FUELS (CLNE): Free Stock Analysis
CUMMINS INC (CMI): Free Stock Analysis Report
CHART INDUSTRIE (GTLS): Free Stock Analysis
CHENIERE ENERGY (LNG): Free Stock Analysis
WESTPORT INNOV (WPRT): Free Stock Analysis
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