Air Products and Chemicals: JunQ/SepQ EPS beats; Revised capex & NEOM agreement in place

研报英文原文证据摘录

Air Products and Chemicals: JunQ/SepQ EPS beats; Revised capex & NEOM agreement in place

Forecast returns

Forecast price appreciation 12.1%

Forecast dividend yield 2.5%

Forecast stock return 14.6%

Market return assumption 9.3%

Forecast excess return 5.3%

Company Description

Air Products (APD) has ~$12.5bn in annual sales and provides gases such as argon, hydrogen,

nitrogen, and oxygen to manufacturers, healthcare facilities, and energy markets. The

company reports along 4 Industrial gas segments, aligned by region. The largest segment is

Americas (~40% of total), followed by Asia (~25%), Europe (~25%), and Middle East/India

(~1%) as well as smaller global/corporate sales. APD delivers gases via pipelines for large-

scale customers from on-site production units, or sells gases in liquid or gaseous form in

tanker trucks, tube trailers, or cylinders for smaller customers.

Valuation Method and Risk Statement

Our price target is based on P/E multiple relative to the local market environment. While the

industrial gases business is one of the least economically sensitive of the chemical sub-sectors,

the stocks typically trade at higher valuations than other chemical stocks, making even small

earnings disappointments often harmful to their stock prices. About 60% of Air Products'

backlog comprises projects being built without an anchor customer, pricing is not set at the

start, and there isn't a known ability for capital pass through. These projects are exposed APD

to cost inflation which could negatively affect project returns and the company's earnings.

Unplanned plant outages, inadequate supplies of key raw materials, and/or an inability to

offset pricing pressure in certain markets could also adversely impact the company's

profitability.