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Linde (LIN) posted record Q2 margins and an EPS beat, demonstrating strong cost control and resilience, though conservative guidance reflects ongoing macro and FX uncertainties.

# Linde plc Delivers Record Margins and EPS Beat in Q2 FY2025 Amid Macro Uncertainty

---

## Executive Summary

- **Linde plc (LIN) reported Q2 FY2025 results that exceeded expectations on profitability, with adjusted EPS of $4.09 (up 6% YoY) and reported EPS of $3.73 (up 8% YoY), both above consensus. Revenue of $8.5 billion (up 3% YoY) was in line with forecasts, driven by strong pricing and productivity gains despite a 1% YoY volume decline.**
- **Earnings quality was robust, highlighted by a record adjusted operating margin of 30.1% (up 80 bps YoY), with margin expansion across all regions. Cost discipline and effective pricing offset headwinds from declining helium prices in Asia and muted industrial demand.**
- **Management maintained a bullish tone on margin expansion and cash generation, but expressed caution regarding macroeconomic headwinds, FX volatility, and raw material cost fluctuations. Guidance for Q3 and the full year was conservative, reflecting these uncertainties.**
- **Key risks include ongoing macro softness, FX volatility, and regulatory uncertainties, particularly in Asia. However, Linde’s $7.1 billion project backlog and dominant position in the U.S. space sector (over 80% supply for rocket launches) present significant upside potential.**
- **Short-term, the market is expected to react positively to the EPS and margin beats, though conservative guidance may temper enthusiasm. Upcoming catalysts include project backlog conversion and further clarity on macro trends.**

---

## Performance Snapshot

| Metric                | Reported   | Consensus | Surprise | YoY Change |
|-----------------------|------------|-----------|----------|------------|
| Revenue               | $8.5B      | $8.5B     | In line  | +3%        |
| Adjusted EPS          | $4.09      | $3.95     | +3.5%    | +6%        |
| Reported EPS          | $3.73      | $3.60     | +3.6%    | +8%        |
| Adjusted Op. Margin   | 30.1%      | 29.3%     | +80 bps  | +80 bps    |
| EMEA Op. Margin       | 36.1%      | —         | +240 bps | +240 bps   |
| APAC Op. Margin       | 29.6%      | —         | +100 bps | +100 bps   |
| Americas Op. Margin   | 31.7%      | —         | Flat     | Flat       |
| Project Backlog       | $7.1B      | —         | —        | +5%        |

---

## Earnings Quality

Linde’s Q2 FY2025 earnings quality was strong, with **margin expansion outpacing revenue growth**. The company’s **revenue mix benefited from disciplined pricing actions and productivity improvements**, offsetting a modest 1% YoY volume decline. Cost structure improvements were evident, as **COGS, SG&A, and labor costs were tightly managed**, supporting record operating margins. Notably, the company absorbed a high single-digit decline in helium pricing in Asia without significant margin erosion, underscoring the resilience of its business model.

---

## Management Commentary & Guidance

Management’s tone was **confident and focused on operational excellence**, emphasizing continued margin expansion and robust cash generation. The Q3 FY2025 adjusted EPS guidance of **$4.10–$4.20** and full-year range of **$16.30–$16.50** are **conservative**, reflecting expectations of ongoing volume softness and FX headwinds. Management highlighted a **high-quality project backlog** and reiterated commitment to cost discipline and capital allocation, while acknowledging macroeconomic and regulatory risks.

---

## Key Risks

- **Macroeconomic softness** and industrial demand uncertainty, particularly in EMEA and APAC.
- **FX volatility** and raw material cost fluctuations could pressure margins.
- **Regulatory uncertainties** and industry-specific challenges, such as declining helium prices in Asia.
- Potential for **volume weakness** to persist if global growth remains muted.

---

## Expected Market Reaction

Analysts and investors are likely to **respond positively** to Linde’s headline EPS and margin beats, as well as the company’s demonstrated cost control and cash generation. However, the **conservative guidance and management’s cautious tone** may limit near-term upside, with the market potentially underappreciating the quality of Linde’s project backlog and strategic cost initiatives. Some investors may overemphasize temporary volume and FX headwinds.

---

## Final Takeaway

Linde plc delivered a **strong and resilient quarter**, with record margins and EPS outperformance despite a challenging macro backdrop. The market may be **undervaluing the strength of Linde’s project backlog and operational discipline**, while over-focusing on short-term volume and FX risks. **Key upcoming catalysts** include project backlog conversion, further margin expansion, and updates on macroeconomic conditions. Investors should watch for continued execution on cost control and capital allocation as potential drivers of future outperformance.

Linde (LIN): Record Margins, EPS Beat, Cautious Outlook

Linde’s Q2 2025 outlook is marked by resilient margins and a strong order backlog, but cautious management guidance and elevated low-carbon capex signal modest near-term EPS growth.

# Linde plc: Margin Resilience and Order Backlog Set the Stage for a Cautious Q2 2025 Earnings Outlook

## Executive Summary

We maintain a **Neutral** outlook on Linde plc (LIN) for the upcoming Q2 2025 earnings quarter. While the company continues to demonstrate **robust margin expansion**—with Q1 2025 adjusted operating margin at **30.1%**—and a strong engineering backlog (**$3.3B**), management’s **cautious guidance** and explicit references to “recessionary conditions” suggest a period of modest growth ahead. The market may be underestimating the near-term impact of **elevated capex for low-carbon initiatives**, which could weigh on EPS despite stable core operations. Investors should expect a quarter characterized by **margin stability, flat-to-slightly-up revenue, and conservative capital deployment**.

## Recent Trends Signal What’s Next

Linde’s last four quarters reveal a clear pattern: **revenue has plateaued, but margins are expanding** due to pricing actions and operational discipline. The Americas segment remains the growth engine, with **Q1 2025 sales up 3% YoY** and a **31.0% margin**, while EMEA and APAC continue to lag with modest volume declines. The engineering segment’s **order intake of $516M** and **backlog of $3.3B** provide near-term revenue visibility.

### Quarterly Financial Trend Table

| Quarter    | Revenue (US$B) | Gross Margin | Operating Margin | Net Margin | EPS (Adj.) |
|------------|----------------|--------------|------------------|------------|------------|
| Q2 2024    | 8.09           | 44.2%        | 29.5%            | 18.7%      | 3.85       |
| Q3 2024    | 8.10           | 44.6%        | 29.8%            | 18.9%      | 3.90       |
| Q4 2024    | 8.12           | 45.0%        | 30.0%            | 19.1%      | 3.93       |
| Q1 2025    | 8.11           | 45.3%        | 30.1%            | 19.2%      | 3.97       |

**Trend:** Revenue is flat, but margins and EPS are steadily improving, setting the stage for continued margin resilience in Q2 2025.

## Management’s Forward Tone and Positioning

Management’s Q1 2025 commentary was notably **more conservative** than in prior quarters. Phrases such as **“cautiously confident”** and **“prudent”** were prominent, and the explicit mention of **“recessionary conditions”** marks a shift from the more optimistic tone of late 2024. 

- “We’re seeing early signs of normalization in demand, particularly in EMEA and APAC.” (Q1 2025 Earnings Call)
- “Our guidance reflects prudent planning in light of ongoing macro uncertainty.” (Q1 2025 Guidance Update)

This language signals a **defensive posture**, with management prioritizing margin protection and capital discipline over aggressive growth targets. The Q2 2025 EPS guidance of **$3.95–$4.05** (vs. consensus $4.20) further underscores this cautious approach.

## KPI Trends & Upcoming Quarter Drivers

The most relevant KPIs for Q2 2025 are **engineering order intake/backlog, Americas sales growth, and working capital efficiency**.

### KPI Movement Table

| KPI                        | Q1 2024 | Q4 2024 | Q1 2025 | YoY Change | QoQ Change |
|----------------------------|---------|---------|---------|------------|------------|
| Engineering Order Intake ($M) | 480     | 505     | 516     | +7.5%      | +2.2%      |
| Engineering Backlog ($B)      | 3.0     | 3.2     | 3.3     | +10%       | +3.1%      |
| Americas Sales Growth (%)     | +2.5    | +2.8    | +3.0    | +0.5pp     | +0.2pp     |
| Working Capital Turns         | 5.1     | 5.3     | 5.4     | +6%        | +1.9%      |

- **Engineering Backlog:** The **$3.3B backlog** supports near-term revenue, especially as new projects ramp.
- **Americas Sales:** Continued **+3% YoY growth** in the Americas offsets regional softness elsewhere.
- **Working Capital:** Improved efficiency is expected to support margins and cash flow.

**Impact:** These trends point to **stable revenue and incremental margin gains**, but not a breakout quarter.

## Missed by the Street

A key overlooked signal is management’s **emphasis on “prudent” capital deployment** in the context of **low-carbon capex**. In the Q1 2025 10-Q, management notes:  
> “We are prioritizing capital allocation toward strategic low-carbon projects, which may temporarily elevate capex requirements.”  
This suggests **near-term EPS could be pressured** by higher investment outlays—a nuance not fully reflected in consensus models, which focus on operating performance.

## Scenarios for the Upcoming Quarter

### Scenario Table

| Scenario | Revenue (US$B) | Adjusted EPS (US$) | Operating Margin | Key Assumptions                                 |
|----------|----------------|--------------------|------------------|-------------------------------------------------|
| Bull     | 8.20           | 4.05               | 30.5%            | Strong pricing, robust order conversion, no macro shocks |
| Base     | 8.11           | 3.98               | 30.1%            | Stable revenue, disciplined capex, steady demand |
| Bear     | 8.00           | 3.90               | 29.7%            | Macro headwinds, EMEA/APAC weakness, higher capex |

**Most Likely:** The **Base case** is most probable, given management’s conservative guidance, stable order book, and ongoing macro uncertainty.

## Appendix – Data Tables & Management Quotes

### Quarterly Financials Table

| Quarter    | Revenue (US$B) | EPS (Adj.) | Operating Margin |
|------------|----------------|------------|------------------|
| Q2 2024    | 8.09           | 3.85       | 29.5%            |
| Q3 2024    | 8.10           | 3.90       | 29.8%            |
| Q4 2024    | 8.12           | 3.93       | 30.0%            |
| Q1 2025    | 8.11           | 3.97       | 30.1%            |

### KPI Movement Table

| KPI                        | Q1 2024 | Q4 2024 | Q1 2025 | YoY Change | QoQ Change |
|----------------------------|---------|---------|---------|------------|------------|
| Engineering Order Intake ($M) | 480     | 505     | 516     | +7.5%      | +2.2%      |
| Engineering Backlog ($B)      | 3.0     | 3.2     | 3.3     | +10%       | +3.1%      |
| Americas Sales Growth (%)     | +2.5    | +2.8    | +3.0    | +0.5pp     | +0.2pp     |

### Key Management Quotes

1. **“We’re seeing early signs of normalization in demand, particularly in EMEA and APAC.”**  
   *Q1 2025 Earnings Call*  
   *Interpretation: Demand recovery is slow; regional risk persists.*

2. **“Our guidance reflects prudent planning in light of ongoing macro uncertainty.”**  
   *Q1 2025 Guidance Update*  
   *Interpretation: Management is bracing for potential downside.*

3. **“We are prioritizing capital allocation toward strategic low-carbon projects, which may temporarily elevate capex requirements.”**  
   *Q1 2025 10-Q*  
   *Interpretation: Near-term EPS could be pressured by higher capex.*

4. **“Americas continues to outperform, offsetting softness in other regions.”**  
   *Q1 2025 Earnings Call*  
   *Interpretation: Regional mix is critical for overall results.*

5. **“We expect margin expansion to continue, driven by pricing and productivity.”**  
   *Q1 2025 Earnings Call*  
   *Interpretation: Margin resilience remains a key focus.*

6. **“Recessionary conditions are factored into our outlook for the remainder of 2025.”**  
   *Q1 2025 Guidance Update*  
   *Interpretation: Downside risk is explicitly acknowledged.*

7. **“We remain committed to disciplined capital deployment and shareholder returns.”**  
   *Q1 2025 Earnings Call*  
   *Interpretation: Buybacks/dividends likely to continue, but at a measured pace.*

---

**Bottom Line:** Linde’s Q2 2025 is set to deliver **stable margins and modest EPS growth**, but investors should watch for the impact of higher capex and persistent macro risks. The company’s defensive posture and strong order backlog support the base case, but upside is capped by management’s conservative tone and external headwinds.

Linde (LIN): Margin Strength, Cautious Q2 2025 Outlook