Editor’s Note: This analysis was originally published as a stock note by Morningstar Equity Research.
Despite a challenging macroeconomic environment, wide-moat-rated Air Liquide AIL delivered a 1.7% year-over-year comparable sales increase in the first quarter, with solid performance across most regions and business lines. We are maintaining our EUR 187 per share fair value estimate, as our slightly more conservative near-term projections amid tariff-related uncertainty were offset by time value of money.
On a comparable basis, first-quarter industrial merchant sales grew by 1% from the same period last year, as 2.5% higher pricing was partially offset by lower volumes. Industrial sales stayed flat, as contribution from new project startups was offset by softer demand. Electronics posted a 4% comparable sales increase, fueled by 10% growth in carrier gases and strong advanced materials sales. Lastly, healthcare maintained its strong momentum, delivering 5% growth driven by both home healthcare and medical gases. Air Liquide generated roughly EUR 131 million in efficiencies in the first quarter, and we believe the industrial gas firm remains on pace to deliver its long-term target of expanding its operating margin by 460 basis points from 2022 levels by 2026.
We believe that Air Liquide faces a minimal direct impact from tariffs, as the nature of the business is very local. Furthermore, we believe that Air Liquide’s business model makes it well positioned to withstand tariff-related uncertainty thanks to long-term customer agreements in the large industries and electronics business lines, ability to pass through cost inflation in the industrial merchant business, and resilient sales in the healthcare business. Lastly, we expect Air Liquide’s record EUR 4.5 billion backlog, up from EUR 4.2 billion at the end of 2024, to translate into solid revenue growth over the next few years.
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