Acceleration of Investment Decisions Positions Air Liquide Well for Future Growth

We are maintaining our EUR 140 fair value estimate for narrow-moat-rated Air Liquide as nothing in its fourth-quarter earnings release materially alters our long-term outlook for the firm. Despite a challenging macroeconomic environment, the industrial gas firm grew its full-year 2022 comparable revenue and EPS both by 7% from the prior year. We see the name as appropriately valued at current levels, with shares trading in 3-star territory.

On a comparable basis, Air Liquide’s fourth-quarter revenue increased by 4.5% year over year. Industrial merchant sales were up 13%, including 15% higher pricing implemented to offset higher energy costs and inflation. Large industries sales decreased by 10% due to soft demand in the steel and chemicals end markets. Electronics delivered 14% year-over-year sales growth, driven by 18% growth in carrier gases as well as contribution from start-ups and ramp-ups. Lastly, healthcare sales grew by 5% as higher pricing and strong home healthcare more than offset a decline in medical oxygen volumes.

Compared with the same period last year, Air Liquide’s fourth-quarter sales increased by 9% in the Americas and 6% in Asia but decreased by 2.6% in Europe, where an 18% year-over-year decline in large industries more than offset 21% growth in industrial merchant and 5% growth in healthcare.

For full-year 2023, management expects to further expand the firm’s operating margin. We believe that Air Liquide is well positioned to navigate macroeconomic uncertainty thanks to its resilient core industrial gas business model. Furthermore, we remain optimistic about the firm’s long-term prospects, as we expect Air Liquide to capitalize on opportunities in blue and green hydrogen as well as opportunities in the electronics end market in Asia and the U.S.