Air Products stock downgraded to hold, price target cut

On Monday, Deutsche Bank adjusted its stance on Air Products (NYSE:APD) & Chemicals Inc. (NYSE: APD), downgrading the company's rating from Buy to Hold and revising the price target to $280 from $310.

The change in rating comes following the immediate resignation of Dr. Samir Serhan, the company's Chief Operating Officer, on Thursday, July 18. Dr. Serhan was responsible for the global operational business and project execution, as well as profit and loss accountability across several regions.

The departure of the COO has prompted Air Products to establish a new 11-person management board, which will report to CEO Seifi Ghasemi.

This restructuring arrives amidst a period of inconsistent earnings performance for Air Products, influenced in part by lower-than-expected economic growth in China, reduced helium demand in the electronics sector, and increased expenditure to support the company's $15 billion energy transition backlog.

In light of these challenges, Deutsche Bank has also revised its earnings estimates for Air Products. The firm's forecast for the fourth fiscal quarter (FQ4) earnings per share (EPS) has been reduced by $0.05 to $3.35, which still represents a 6% increase, albeit below the consensus of $3.54.

Additionally, the EPS estimate for fiscal year 2025 has been decreased by $0.15 to $13.00, an 8% rise, but again below the consensus estimate of $13.36.

The new price target reflects a 7% upside, based on Air Products trading at an estimated 2025 enterprise value to EBITDA (EV/EBITDA) multiple of 13.8x, which is slightly lower than its current year multiple.

This adjustment by Deutsche Bank signals caution in the near-term earnings potential for Air Products, taking into account the recent executive departure and the company's financial performance.

In other recent news, Air Products & Chemicals, Inc. reported significant developments, including the immediate resignation of its Chief Operating Officer, Dr. Samir J. Serhan.

The company also announced its decision to sell its liquefied natural gas (LNG) equipment business to Honeywell (NASDAQ:HON) for $1.8 billion, a strategic move noted by BMO Capital Markets. This transaction is expected to positively impact Air Products' financial health and stabilize its earnings over time.

Furthermore, the company secured a significant 15-year contract to supply green hydrogen to TotalEnergies (EPA:TTEF) in Europe, a development that TD Cowen predicts will yield a return of over 10%. Air Products also plans to invest over $70 million to expand its manufacturing and logistics center in Missouri to meet increasing demand across various industries by 2025.

In terms of analyst notes, BMO Capital Markets, TD Cowen, and Mizuho Securities updated their price targets for Air Products, with all firms maintaining a Buy rating.

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