APD: Decarbonization Projects Will Drive Future Earnings Confidence Amid Execution Progress

Analysts have nudged their price targets for Air Products and Chemicals lower, trimming fair value by about $16 to reflect slightly higher discount rates, more conservative revenue growth and margin assumptions, and only modest compression in future P E multiples.

Analyst Commentary

Recent Street research reflects a mixed but generally constructive stance on Air Products and Chemicals, with price targets revised lower but ratings largely maintained as investors wait for greater clarity on execution.

Bullish Takeaways

Bullish analysts point to the post earnings share price rally as evidence that the market is gaining confidence in the company’s turnaround plan, even as official price targets are trimmed.
The decision to maintain positive ratings while cutting targets suggests that analysts still see upside to the current share price, but are embedding more conservative assumptions into their valuation models.
Improving sentiment around operational execution, particularly on major strategic initiatives, is viewed as a potential catalyst for future target increases once additional progress is demonstrated.
The recalibrated targets leave room for multiple expansion if management can deliver on growth and margin improvement in line with revised expectations.

Bearish Takeaways

Bearish analysts are signaling concern by lowering price targets, indicating that higher discount rates and more cautious growth forecasts are pressuring fair value estimates.
The Neutral stance from JPMorgan, even after earnings, underscores ongoing uncertainty around the speed and reliability of the company’s execution on key projects.
Reduced targets imply less near term upside and highlight the risk that delays or setbacks in large scale initiatives could further compress valuation multiples.
Investors are being guided to wait for clearer updates on major projects before assigning a higher growth premium, limiting immediate re rating potential for the shares.

What's in the News

Yara and Air Products are in advanced negotiations to partner on low emission ammonia projects in the United States, aiming to leverage Air Products industrial gas and low emission hydrogen capabilities with Yara's global ammonia distribution network (Key Developments).
At the Louisiana Clean Energy Complex, Air Products plans to develop what is described as the world's largest low carbon hydrogen facility, targeting production of over 750 million standard cubic feet per day of low carbon hydrogen with 95 percent CO2 capture, and enabling Yara to acquire roughly 25 percent of the total project cost tied to ammonia assets once performance tests are met (Key Developments).
Under the proposed structure for the Louisiana project, approximately 80 percent of the low carbon hydrogen output would be supplied to Yara via a 25 year offtake agreement to produce about 2.8 million tonnes of low carbon ammonia annually, with the remainder feeding Air Products customers through its 700 mile U.S. Gulf Coast hydrogen pipeline system (Key Developments).
The NEOM Green Hydrogen Project in Saudi Arabia, where Air Products is the sole offtaker of up to 1.2 million tonnes per year of renewable ammonia, is reported to be more than 90 percent complete and is expected to begin commercial production in 2027. A targeted marketing and distribution agreement with Yara is anticipated in the first half of 2026 (Key Developments).
Between July 1 and September 30, 2025, Air Products did not repurchase any shares, but the company has now completed buybacks totaling 6,315,933 shares, or 2.96 percent of shares outstanding, for $514.68 million under the program launched in 2011 (Key Developments).

Valuation Changes

Fair Value was reduced modestly from approximately $309 to $293 per share, reflecting slightly more conservative assumptions.
The Discount Rate increased slightly from about 7.94 percent to 8.00 percent, modestly pressuring discounted cash flow valuations.
Revenue Growth was trimmed marginally from roughly 5.81 percent to 5.72 percent annually, indicating a slightly slower growth outlook.
The Net Profit Margin was lowered from about 25.38 percent to 24.66 percent, signaling a small reduction in long term profitability expectations.
Future P E eased slightly from approximately 23.83x to 23.35x, implying a modestly lower valuation multiple on forward earnings.

Expansion in hydrogen, ammonia, and carbon capture, along with long-term contracts, positions Air Products for stable revenue and margin growth as clean energy demand rises.
Ongoing productivity improvements, disciplined capital allocation, and focus on stable end-markets reinforce earnings strength and support increasing returns for shareholders.
Large-scale project costs, market headwinds, and intensifying competition threaten Air Products' financial flexibility, profit margins, and ability to deliver near-term earnings growth.

Catalysts

About Air Products and Chemicals

Provides atmospheric gases, process and specialty gases, equipment, and related services in the Americas, Asia, Europe, the Middle East, India, and internationally.What are the underlying business or industry changes driving this perspective?

Strong global momentum toward low-carbon and renewable energy solutions, particularly the increasing adoption of hydrogen and clean ammonia, is driving major project opportunities for Air Products, positioning them to capture substantial long-term revenue growth as these sectors expand and regulation tightens on emissions.
Heavy investments in large-scale hydrogen, blue/green ammonia, and carbon capture projects-supported by multi-decade power and supply agreements in growth regions (e.g., Middle East, Asia, U.S. Gulf Coast)-are set to come online over the next several years, providing robust and stable earnings and supporting a trajectory of consistently higher operating margins.
Significant, ongoing productivity and cost optimization efforts-including a 10% headcount reduction, expanded use of AI and digital tools (especially in energy management), and lowest SG&A/sales ratios in the industry-are on track to deliver $185M–$195M in annual savings, directly uplifting EBITDA and net margins.
Expansion in growth end-markets such as electronics (semiconductor and display manufacturing in Asia) and healthcare, along with a strategic pivot to more long-term on-site contracts, supports stable, recurring revenues and improved volume growth, even as short-term cyclical headwinds in segments like helium temporarily weigh on reported results.
Projected capital allocation discipline, aimed at aligning CapEx with internally generated cash and maintaining or reducing leverage over the next three years, is expected to drive gradual improvement in return on capital employed (ROCE) to mid
to high-teens by 2030, enhancing overall earnings power and supporting shareholder returns.

Air Products and Chemicals Earnings and Revenue Growth

Air Products and Chemicals Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Air Products and Chemicals's revenue will grow by 7.4% annually over the next 3 years.
Analysts assume that profit margins will increase from 13.0% today to 25.3% in 3 years time.
Analysts expect earnings to reach $3.8 billion (and earnings per share of $16.99) by about September 2028, up from $1.6 billion today.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 24.0x on those 2028 earnings, down from 40.6x today. This future PE is lower than the current PE for the US Chemicals industry at 25.9x.
Analysts expect the number of shares outstanding to grow by 0.08% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 7.85%, as per the Simply Wall St company report.

Air Products and Chemicals Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Heavy ongoing capital expenditure requirements for major hydrogen, blue/green ammonia, and energy transition projects may constrain free cash flow and limit Air Products' financial flexibility; delays or overruns could negatively impact future earnings and dividend growth.
Declining demand and structural changes in the helium market, combined with project exits (like World Energy), have resulted in a 4–5% annual headwind to EPS, and uncertainty remains about when helium profits will stabilize, risking further revenue and margin volatility.
Intensifying competition in the blue ammonia and clean hydrogen sectors-especially from new and existing players in the U.S. Gulf Coast and abroad-could lead to fewer logical equity partners, diminishing Air Products' pricing power and pressuring long-term profitability.
Inflationary pressures and potential increases in tariffs (particularly impacting suppliers and customers) could raise operating costs, making it difficult for Air Products to maintain current margins if they cannot fully pass these costs onto customers.
The company's earnings and returns on capital are currently being weighed down by unproductive capital-in-process (CIP), and further delays in bringing underperforming or large new projects (such as NEOM, Darrow, Edmonton, Rotterdam) online could depress ROCE and delay anticipated improvements in net margins and earnings growth.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $324.143 for Air Products and Chemicals based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $375.0, and the most bearish reporting a price target of just $275.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $14.9 billion, earnings will come to $3.8 billion, and it would be trading on a PE ratio of 24.0x, assuming you use a discount rate of 7.9%.
Given the current share price of $287.14, the analyst price target of $324.14 is 11.4% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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