Linde Me Your Ears

JPMorgan $JPM ( ▲ 0.38% ) upgraded Linde $LIN ( ▲ 0.68% ) to Overweight, raising its price target to $525.

Analyst Jeffrey Zekauskas cited the improving helium market and Linde's positioning versus other materials companies as the primary drivers.

Linde's US chemical customers are likely to increase operating rates to take advantage of higher export prices, Zekauskas said. He sees the industrial gas supplier as better suited for current conditions than most of its peers in materials.

The analyst also pointed to Linde's contracts, which allow raw material inflation to be passed through to customers. In inflationary markets, the company has historically raised prices faster than during calmer periods.

The Middle East conflict has upended global helium supply.

Qatar produces roughly one-third of the world's helium, and QatarEnergy's LNG output has been suspended since the start of the Iran conflict and the closure of the Strait of Hormuz.

The disruption has also reduced the availability of ISO-tanks, the specialized vessels used to ship helium around the world.

Linde holds a meaningful cushion. The company maintains a large storage cavern with capacity for roughly half a year of global helium demand, Zekauskas noted. Excess production capacity in Russia provides an additional buffer.

Zekauskas said Linde was trading near $510 before the conflict and believes the stock can retrace to that level. He sees room for both volume and price to accelerate, which he described as evidence of strong defensive characteristics.

Of the 27 analysts covering Linde, 21 rate it a Buy or Strong Buy, five rate it a Hold, and one rates it Underperform.

Shares are higher year to date. When supply gets tight, it pays to own the cavern.