Linde plc (LIN): A Steady Bet on Hydrogen and Industrial Gases in a Volatile World

The global economy may be grappling with inflation, interest rate hikes, and geopolitical tensions, but Linde plc (LIN) is proving that certain sectors thrive in uncertainty. Specializing in industrial gases and hydrogen infrastructure, Linde has built a fortress-like business model with a $10 billion+ project backlog, long-term contracts, and a strategic pivot toward clean energy. While near-term risks like delayed projects and currency headwinds linger, the company's defensive profile and hydrogen-driven growth case make it a compelling long-term buy.

The Backlog Advantage: A Shield Against Economic Downturns

Linde's $10 billion total project backlog as of Q1 2025 acts as an anchor of stability. Over $7 billion of this is tied to sale-of-gas (SOG) contracts, which lock in steady revenue streams for years. These contracts, common in industrial gases like oxygen and nitrogen, are critical for sectors such as healthcare, manufacturing, and electronics—markets that remain resilient even during slowdowns.

But the real growth driver is hydrogen: Linde has earmarked $8–$10 billion in low-carbon hydrogen projects over the next few years, fueled by tax incentives like the U.S. 45Q credit. These projects include partnerships like its $2 billion clean hydrogen facility with Dow in Alberta (though delayed, it remains a flagship deal).

Hydrogen: The Catalyst for Long-Term Growth

Hydrogen is Linde's moonshot. The company is positioning itself as a leader in blue hydrogen (using carbon capture) and selectively pursuing green hydrogen where renewables are cheap. This focus aligns perfectly with global decarbonization targets.

The $8–$10 billion hydrogen pipeline isn't just a number—it's a roadmap to profit. Linde's expertise in gas infrastructure and carbon capture systems gives it a first-mover advantage. For context, the global hydrogen market is projected to grow at a 13% CAGR through 2030, and Linde is already capturing a meaningful slice of this.

Defensive Sectors: Cash Flow That Keeps Flowing

Linde's revenue streams are as diversified as they are recession-resistant. Key sectors include:
- Healthcare: Hospitals rely on medical gases like oxygen.
- Manufacturing: Steel and chemical plants depend on industrial gases for processes.
- Electronics: High-purity gases are critical for semiconductor manufacturing.

This mix ensures that even if one sector falters, others pick up the slack. Q1 2025 results underscored this resilience: while sales in EMEA and APAC dipped due to weaker manufacturing, Americas sales grew 3%, and operating margins hit 30.1%—a 120 basis-point jump year-over-year.

Risks: The Clouds on the Horizon

No investment is without risks. Linde faces:
1. Project Delays: The Alberta hydrogen project, now postponed, highlights execution risks.
2. Currency Volatility: A 2% headwind is already priced into 2025 guidance.
3. Macroeconomic Drag: Weaker manufacturing demand in regions like EMEA could crimp short-term profits.

Valuation: A Fair Price for a Stable Growth Engine

At current prices, LIN trades at a 16.5x P/E ratio, slightly below its 5-year average but reasonable given its defensive profile. The dividend yield of 1.8% is modest but reliable, supported by a $2.2 billion operating cash flow in Q1 alone.

Long-term investors should focus on Linde's $50 billion total clean energy opportunity, not just near-term hiccups. The stock's 11% YTD cash flow growth and disciplined capital allocation ($5.5 billion in 2025 capex) suggest it's primed to capitalize on hydrogen's boom.

Investment Thesis: Buy for the Long Game

Linde is a buy for investors with a 3–5 year horizon, prioritizing stability and exposure to decarbonization. Key catalysts include:
- Hydrogen project starts: $1 billion of backlog projects are slated for 2025 execution.
- Margin expansion: AI-driven productivity initiatives are boosting efficiency.
- Dividend consistency: Shareholder returns (dividends + buybacks) hit $1.8 billion in Q1.

While short-term volatility is inevitable, Linde's backlog, sector diversification, and hydrogen tailwinds position it to outperform cyclicals. For income seekers, the dividend is a bonus; for growth investors, the hydrogen pipeline is the prize.

Final Take

Linde isn't a high-flying tech stock, but it's a cornerstone holding in an uncertain world. With a fortress balance sheet, a backlog that's both deep and diversified, and a clear path to clean energy leadership, LIN deserves a spot in long-term portfolios. Ride out the near-term noise—this is a stock built to last.

Rating: Buy
Price Target (2026): $240 (based on 18x 2026E EPS of $13.33, factoring in margin expansion and hydrogen growth).