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On Tuesday, BofA Securities adjusted its stance on Air Products & Chemicals Inc. (NYSE:APD), downgrading the stock from Neutral to Underperform, and simultaneously decreasing the price target from $330.00 to $282.00. The revision by BofA Securities was influenced by the perceived increased risks associated with Air Products’ clean hydrogen projects, particularly the NEOM project initiated in 2020. Despite these concerns, InvestingPro analysis shows the company remains profitable with $12 billion in revenue over the last twelve months and has maintained dividend payments for an impressive 55 consecutive years.
According to BofA Securities, while the NEOM project, along with others in Louisiana and Alberta, were initially seen as opportunities for significant earnings growth, they now face heightened uncertainties. These concerns stem from potential impacts of President Trump’s global trade initiatives, which could lead to additional capital expenditures, project delays, and reluctance among customers to commit to long-term contracts at favorable prices.
The analyst noted that the NEOM project’s main market in Europe might postpone clean hydrogen initiatives and pivot from green to blue hydrogen. Additionally, the Louisiana project’s domestic blue hydrogen could see reduced interest due to Trump’s challenges to climate policies, including the Endangerment Finding. This shift could mirror the difficulties faced by similar projects, like the one undertaken by CF Industries Holdings Inc (NYSE:CF)., as mentioned in the report.
The downgrade reflects concerns about the return potential of Air Products’ remaining key projects. The BofA Securities analyst pointed out that the new leadership at Air Products has already closed down some projects that were not on track to succeed. However, the current global trade environment and policy challenges pose risks to the company’s clean hydrogen and blue ammonia export projects, affecting the long-term outlook for Air Products & Chemicals Inc.
In other recent news, Air Products & Chemicals Inc. announced it will record a pre-tax charge of up to $3.1 billion in the fiscal second quarter of 2025 due to the termination of three major projects in the United States. This strategic decision, driven by new CEO Eduardo Menezes and the Board of Directors, involves exiting a Sustainable Aviation Fuel project in California, a green hydrogen facility in New York, and a carbon monoxide project in Texas. Despite the significant charge, the company stated that it will not impact its adjusted earnings per share for fiscal 2025. Citi and UBS have adjusted their price targets for Air Products, with Citi lowering its target to $345 and UBS to $370, both maintaining a Buy rating. These revisions reflect the analysts’ confidence in the company’s management changes and strategic direction. BMO Capital has maintained a Market Perform rating with a $346 price target, noting the proactive steps taken by the new CEO. Additionally, Air Products is presenting its Freshline® Smart Technology at the Seafood Expo North America, showcasing innovations aimed at enhancing efficiency in seafood processing. The company’s ongoing projects, such as the NEOM green hydrogen project in Saudi Arabia, are progressing, with the NEOM project nearing 80% completion.
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