3 Reasons to Buy Chart Industries (or Flowserve Corporation) Like There's No Tomorrow

Chart Industries is a leader in cryogenic tanks, heat exchangers, fans, and blowers that handle industrial gases and liquids.

Meanwhile, Flowserve is a leader in industrial valves, pumps, and ...

Top 10 Stocks to Buy Now › Investors are always searching for new and exciting ways to play the AI revolution, with one being electricity providers.

Specifically, nuclear energy stocks have taken off over the past year, given the newfound need for more low-carbon electricity.

In spite of that, some industrial stocks that supply the nuclear and natural gas industries really haven't moved very much.

Case in point, equipment suppliers Chart Industries ( GTLS +0.00% ) and Flowserve Corporation ( FLS +1.16% ) decided to link up in a "merger of equals," on June 4.

The tie-up of these key equipment suppliers should save costs while also strengthening both companies' exposure to these crucial LNG and nuclear markets.

After the announcement, both stocks look like huge bargains -- a rarity for any AI-exposed stock.

Expand NYSE : GTLS Chart Industries Today's Change ( 0.00 %) $ 0.00 Current Price $ 0.00 Key Data Points Going nuclear...

with LNG, too Chart Industries is a leader in cryogenic tanks, heat exchangers, fans, and blowers that handle industrial gases and liquids.

Meanwhile, Flowserve is a leader in industrial valves, pumps, and flow-control equipment.

The companies believe that by combining, they'll be able to offer comprehensive end-to-end industrial systems for customers, from the engineering through aftermarket stages, thus enabling strong cross-selling revenue opportunities.

Overall, management believes the tie-up can lead to an incremental 2% growth rate over what the companies would do independently.

There's two key markets that each company would like to serve better as a result of the deal: natural gas and nuclear -- each of which are growing in importance because of the accelerating demand for clean electricity from AI data centers.

As the following slide shows, Flowserve had only 2% of revenue coming from LNG before the merger, while LNG was a core business for Chart, at 15%.

Meanwhile, Flowserve had a more significant exposure to nuclear plants, at 7% of trailing revenues, while Chart had 7% exposure to the nuclear, hydrogen, and helium markets combined.

While the rest of Chart and Flowserve's end-markets are typically mid-single digit growth markets, with some a bit higher and some a bit lower, the nuclear and LNG end markets are forecast to realize double-digit growth over the medium term, thanks to surging AI demand.

Aside from bolstering each company's growth prospects, the tie-up should also yield substantial cost savings.

In conjunction with the merger, the companies projected $300 million in cost synergies, which they believe will be achieved over the next three years.

It should be noted that Chart exceeded its projected synergy targets following its 2023 Howden acquisition by a fair amount, which means that $300 million synergy target may also be conservative.

So look for the combined company to significantly lower costs and boost margins post-merger.

On top of that, there's also a significant refinancing opportunity.

Chart used a lot of debt to make the $4.4 billion Howden acquisition, and was still fairly leveraged as of this year.

The Howden acquisition also occurred at a difficult time for the markets, so Chart's debt is at rather high and variable interest rates.

However, combining with Flowserve will lower the combined company's overall leverage ratio to just 2.0 times EBITDA , which will enable an investment-grade credit rating.