Linde PLC (LIN) (Q2 2026) Earnings Call Highlights: Record Sales and EPS Amid Margin Pressures

This article first appeared on GuruFocus.

Release Date: July 31, 2026

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Record sales and EPS levels in Q2 2026, with both growing at near double-digit percent year-over-year. Increased the project backlog by $1 billion to $8.1 billion, driven by a new electronics win in the US, with expectations to finish the year with an '8 handle'. Electronics remains the fastest-growing market, with strong momentum expected to continue, supported by AI-related hardware and new project startups. Manufacturing recovery is underway, particularly in the US, with aerospace accounting for more than a third of manufacturing growth and strong signals from the package business. Helium business is navigating Middle East disruptions effectively, signing new long-term contracts and achieving strong price improvements, with expectations of margin recovery in coming quarters.

Negative Points

Margins excluding cost pass-through declined approximately 30 basis points year-over-year, primarily driven by the Americas segment. The US home care (LinCare) business continues to face headwinds from higher cost inflation and reimbursement changes, acting as a significant margin drag. Higher equipment and hard goods sales, while a positive sign for US manufacturing, are diluting margins in the short term. The company remains cautious on macroeconomic conditions, leaving guidance assumptions unchanged and not incorporating recent volume recovery into future forecasts. Ongoing Middle East disruptions, particularly in the Strait of Hormuz, are impacting industrial activity in Asia and creating uncertainty, with helium normalization not expected until early next year.

Q & A Highlights

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Q: Can you dig a little bit deeper into the healthcare comment? Much of the headwind over the last year, is the business currently profitable at all, or how much of a margin drag has it been on the business? A: Sanjeev (CEO): The Americas business, excluding the US homecare or LinCare business, would be up 20 basis points on margin. The gas business is doing well, and the double-digit hard goods sales are a good sign of US manufacturing recovery, though they have a temporary margin impact. We are not happy with margins and have aggressive actions underway to attack the issues in the LinCare business, expecting sequential improvement moving forward.

Story Continues

Q: I did the math, home care penalty was $30 million in the second quarter. So order of magnitude, is it a $100 million penalty for this year? And is LinCare all of your 23% healthcare revenues of the Americas? A: Matt (CFO): The numbers are higher than what you haveprobably 30% higher than that number, give or take. LinCare is clearly the largest piece of the Americas healthcare business, though it does not include the institutional portion which runs through the traditional gas business. Jeff (CEO): The challenges at LinCare are not new. It has faced persistent headwinds from labor cost inflation and changes in the reimbursement environment. We have put a new management team in place, have been pruning the portfolio, and are evaluating strategic options with diligence to determine if the business will have a meaningful positive impact on our portfolio.

Q: In the past you called out space being a billion dollar opportunity, I'm just wondering if you have any update on that number? A: Sanjeev (CEO): The space sector continues to grow, and we are on track for that billion dollar opportunity to be laid out, with 2030 as the timeline. Once it reaches a certain size, we will split it out in our end markets and have more visibility around it.

Q: Can you share maybe some revenue intensity of the cap or give some guidance on your European flagged like a 25% CapEx to revenue conversion on some of these projects, is that a reasonable ballpark? A: Matt (CFO): The revenue to capex is always a function of whether it's atmospheric or process gasses like hydrogen. Traditionally for us, revenue has ranged anywhere from 20% to 50% depending upon energy control. Of the ones we've won, they are very similar in structure to the ones we already have in place on the first few phases, with no real difference because those contracts follow a very similar construct.

Q: If I look at your volume trend in Asia, it was up 6% for a consecutive quarter, versus call it either side of flat throughout 2025, can you unpack that a little bit for us? A: Sanjeev (CEO): There are three components to what is happening in the Asia volumes: base volume, significant sale of equipment for electronics customers that had a disproportionate impact this quarter, and ramp-ups of backlog projects that were started up and are ramping up in ASEAN in particular. You put those three together and you see that healthy 6% sitting over there.

Q: I know it's early for 2027, given project startups, helium may be a tailwind next year, growth in space and productivity, do you need much of any macro improvement to get to double-digit 10% EPS growth next year? A: Sanjeev (CEO): As our EPS algorithm lays out, between management actions and capital deployment, we should be delivering 8% to 12% growth. We're not looking for macro as long as macro is not taking away from that. It's very early to talk about 2027, but helium should be normalized next year, though the complexity and price mix will play a role in what helium does.

Q: Can you speak to what you're seeing in particular out of APAC on the industrial side in terms of long-term investment? Is the Strait of Hormuz conflict having any slowdown effect on future projects growth in the industrial markets looking out over the next 2 to 3 years? A: Sanjeev (CEO): The headline is business as usual, reflected in a bit of a change in the mix. There is clearly strong electronics growth, and we expect the pipeline for electronics growth in Asia to remain fairly robust. We do not expect significant steel investments in China going forward, but in India you're seeing traditional end market investments happen in steel, refining, and other manufacturing elements. The mix is getting more positively impacted by electronics, with the rest being made up of the more traditional end markets.

Q: Can you elaborate a little bit more on some of the actions you're taking to drive a little bit of the margin recovery? Do you expect that negative operating leverage to be solved, and what would drive thatmanagement actions, pricing, or productivity? A: Matt (CFO): In 2025, we had strong front half margins and weaker back half margins, so we expect better year-over-year performance given how last year played out. LinCare is going to be the focus given it's the biggest driver. Some of the mix effects like higher hard good sales and sale of equipment are positive and will continue. We will likely take some cost actions this quarter to get ahead of the inflation we're seeing around the world. In some regions we're seeing growth which supports it, in others we're seeing inflation without growth, and that's an area we're going to focus on specifically this quarter.

Q: What's the impact on your business and on your customers from what's happening with the Strait of Hormuz, particularly with helium, and if that issue resides, what do you think the impact will be a year out as that starts to normalize? A: Sanjeev (CEO): On helium, I'm really pleased with how our team has navigated this complex set of issues. We've maintained reliable and safe supply to existing contract customers and signed up new customers with long-term contracts. We've had pricing move along, though with higher dislocation costs related to helium, the overall recovery doesn't quite show through in margins just yetI fully expect that over the next couple of quarters. I don't think you will see normalization this year; it will probably take us into the early part of next year. In Asia, countries highly dependent on hydrocarbons from the Middle East have had to scale back industrial activity, with markets like India, parts of Australia, and to a lesser extent China seeing that impact.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

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