October 8, 2018

AI:FRA – Market expectations are for record-high Uniform ROA, but management has concerns about efficiencies, trade conflicts, and growth


  • L’Air Liquide S.A. (AI:FRA)currently trades near recent averages relative to UAFRS-based (Uniform) Earnings, with a 25.3x UAFRS-based P/E. At these levels, the market has bullish expectations for the firm, but management has concerns about their ability to improve their efficiencies, global trade tensions, and growth in developing economies
  • Specifically, management may lack confidence in their ability to improve their digital capabilities and their efficiencies through capital expenditures. Also, they may lack confidence in their ability to balance their spending on growth and efficiencies, and may be concerned about the repercussions of recent trade conflicts in the steel industry. Furthermore, they appear concerned about the sustainability of improved pricing in their industrial merchant business, and about growth in their energy and industrial merchant segments. Additionally, they may lack confidence in their ability to improve growth across their businesses in developing economies, and may be exaggerating their opportunities in China. Finally, they may be concerned about tensions in hydrogen bidding activity, and about their Smart Innovative Operations
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