Linde Q2 Profit Rises on Record Backlog, Homecare Unit Under Review

Linde plc posted record sales and near-double-digit EPS growth in the second quarter. The project backlog reached $8.1 billion, driven by electronics wins in the Western U.S. Operating margins excluding cost pass-through fell 30 basis points.

The margin decline came from the U.S. homecare business, Lincare. Labor cost inflation and unfavorable reimbursement policy changes kept pressure on the unit. A mix shift toward lower-margin equipment sales added to the drag. Strip out Lincare, management said, and Americas margins would have risen 20 basis points. The company is evaluating the strategic fit of the homecare unit. A new management team is pruning the portfolio and working on quality improvements.

Sequential margin improvement is expected in the third quarter. Cost actions on Lincare and inflation management are expected to take hold during the period. Full-year EPS guidance was raised at the bottom end to a range of $17.70 to $17.90. The midpoint assumes no economic improvement and a neutral stance on macro volatility.

Electronics remains the fastest-growing end market. AI-related hardware demand and advanced node fab expansions in the U.S. and Asia are fueling the pipeline. Linde's Taiwan joint venture landed roughly $800 million in electronics wins not yet counted in the primary sale-of-gas backlog.

Equipment sales for these projects carry lower margins. Management sees them as the entry ticket for long-term, high-margin gas supply contracts at the same fabs. Higher equipment and hardgoods sales in the Americas and APAC are currently dilutive to margins. Management views these sales as strategic 'pull-through' mechanisms for future high-margin gas sales. The company is flexible in offering both 'sale of gas' and 'sale of plant' models, often including operate-and-maintain agreements to manage customer-owned infrastructure.

Manufacturing growth is picking up in the U.S., led by aerospace activity and data center construction. Management called this a signal of a broader recovery in the sector. Geopolitical instability in the Middle East has forced some industrial scaling back in Asian markets like India and China due to hydrocarbon dependency.

Helium supply chains remain tangled. Geopolitical tensions in the Middle East, particularly around the Strait of Hormuz, have kept logistics costly. Linde has used its diverse sourcing network to secure new long-term contracts. Current helium contributions are positive on a dollar basis and dilutive on margin. Full market normalization is unlikely this calendar year and will probably stretch into early 2027, depending on when Qatari production restarts. Linde's broader commodities exposure spans industrial gases and helium.

The commercial space market is a longer-term play. Management sees a $1 billion-plus opportunity by 2030 and has allocated increased base CAPEX to support it. Some large space customers desire vertical integration for atmospheric gases, similar to traditional on-site industrial customers.

The company expects to start up more than 20 projects in the remainder of the year, representing about $1.3 billion in investments. The backlog sits at an '8 handle', meaning it exceeds $800 million. Management expressed confidence in the pipeline across electronics and manufacturing.

Linde's stock rose 2.08% to $199.10 on the session. The Alpha Score of 44/100 labels the stock 'Mixed', capturing the record backlog alongside the operational drag from homecare and the equipment mix shift.