Linde Q4 2025: Adjusted Earnings Growth Masks Reported Declines Amid High Valuation

What happened

Linde reported an 11% decline in Q4 2025 net income and a 9% drop in EPS, driven by purchase accounting impacts and restructuring charges. Excluding these items, adjusted net income rose 4% and adjusted EPS increased 6%, indicating underlying operational resilience. Sales grew 6% year-over-year to $8.76 billion, aligning with the master report's emphasis on stable cash flows from long-term contracts. The discrepancy between reported and adjusted figures underscores the need to scrutinize earnings quality beyond headline propaganda. However, with a P/E of 31.5 and a DCF anchor of $228 per share, valuation remains stretched despite this adjusted growth.

Implication

The improvement in adjusted EPS and sales reinforces Linde's operational strength, supported by its resilient contract-based model. However, the reported net income decline highlights non-operational charges that could recur, affecting future profitability. With a P/E of 31.5 and thin margin of safety, the stock's upside is limited unless fundamentals improve significantly. Key risks from the master report, such as timing of low-carbon hydrogen projects and Europe volume softness, require close monitoring as they could dampen growth. A hold stance is warranted until valuation aligns better or backlog execution provides clearer catalysts.

Thesis delta

The Q4 results confirm Linde's ability to deliver adjusted growth, but do not shift the HOLD thesis due to high valuation and ongoing risks. Adjusted metrics support the resilient cash flow narrative, yet project-timing uncertainties and Europe headwinds persist. Investors should await sustained backlog conversion or a valuation pullback before considering an upgrade.