Chart Industries Completes Buyout of Harsco's AXC Business

Chart Industries, Inc. GTLS, yesterday, announced that it has successfully completed the acquisition of the Industrial Air-X-Changers (“AXC”) business of Harsco Corporation HSC. The buyout, valued at $592 million, was announced on May 9.

Before we proceed further with the buyout details, it’s worth mentioning that Harsco’s AXC business specializes in manufacturing air coolers (ranging from small to large as well as custom designed), largely driven by hydraulic motor, engine and electric motor configurations. Products are mainly used in chemical plants, oil refining, power generation, gas compression and other applications.

The business’ revenues and earnings before interest, tax, depreciation and amortization (EBITDA) margin are anticipated to be roughly $260 million and 23%, respectively, in 2019.

Details of the Buyout

Notably, the acquired assets will help Chart Industries strengthen its businesses in the industrial energy and gas market. With easy access to the compression market, the company now will be able to benefit from heavy demand for air-cooled heat exchangers required for production and transportation of natural gas and oil.

The buyout will have immediate positive impacts on Chart Industries’ gross, operating and EBITDA margins. Cost synergies of roughly $20 million are anticipated in the initial year of the completion, while the transaction’s asset purchase structure will help the company realize $90 million in tax benefits in the future.

Also, with this acquisition, Chart Industries revised its reporting business segments to Distribution & Storage East, Distribution & Storage West, Energy & Chemicals Cryogenics, and Energy & Chemicals FinFans. Notably, the Energy & Chemicals FinFans segment will comprise operations of Chart Cooler Services, Air-X-Changers and Hudson Products (acquired in September 2017).

With a market capitalization of $2.8 billion, Chart Industries currently carries a Zacks Rank #2 (Buy). The company anticipates gaining from healthy contribution from its LNG projects (revenues from Calcasieu and Golar Gimi projects are predicted to be $28-30 million) and acquisition of Harsco’s AXC business.

The company currently predicts earnings for 2019 to be $2.85-$3.20 per share, higher than the original guidance of $2.50-$2.85 and the previously mentioned $2.70-$3.05. Adjusted earnings in 2020 are predicted to be $5.05-$5.35 per share. Revenues are projected to be $1.41-$1.46 billion, above the previously mentioned $1.29-$1.34 billion and the original guidance of $1.26-1.31 billion.

Further, earnings estimates for the company have been revised upward in the past 60 days. Currently, the Zacks Consensus Estimate for Chart Industries is pegged at $3.00 for 2019 and $5.14 for 2020, indicating growth of 3.4% and 28.8% from the respective 60-day-ago figures.

Chart Industries, Inc. Price and Consensus

Chart Industries, Inc. Price and Consensus

Chart Industries, Inc. price-consensus-chart | Chart Industries, Inc. Quote

Year to date, the company’s share price has increased 16.3% compared with growth of 28% recorded by the industry.

Two other top-ranked stocks in the industry are Roper Technologies, Inc. ROP and RBC Bearings Incorporated ROLL. While Roper Technologies currently sports a Zacks Rank #1 (Strong Buy), RBC Bearings carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

In the past 60 days, earnings estimates for the two stocks have improved for the current year. Further, average earnings surprise for the last four quarters was positive 8.43% for Roper Technologies and 8.36% for RBC Bearings.

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