Trump announces trade deal with EU following months of negotiations
Investing.com -- J.P. Morgan downgraded Air Liquide SA (EPA:AIRP) to a “neutral” rating from “overweight,” citing stretched valuation and limited upside after the stock outperformed its sector year-to-date.
The revised 12-month price target was lowered to €190 from €195, reflecting modest cuts to earnings estimates primarily driven by foreign exchange headwinds.
The French industrial gases giant has seen its stock rise 14% so far in 2025, outperforming the European chemicals sector, which is up 4%.
Despite a favorable long-term investment outlook, analysts said the stock’s premium valuation now leaves a more balanced risk-reward profile.
On J.P. Morgan’s updated projections, Air Liquide trades at a 2026 estimated price-to-earnings ratio of 24 times, compared to a historical median of 22 times over 10 years and slightly above Linde’s valuation on a relative basis.
Key earnings revisions include a cut to 2025 and 2026 adjusted EPS forecasts by roughly 2%, now at €6.65 and €7.47, respectively.
These are both below Bloomberg consensus estimates. Revenue projections were also trimmed, with 2025 expected at €27.8 billion, down from a prior estimate of €29.2 billion, while 2026 was lowered to €29.3 billion from €30.8 billion.
J.P. Morgan maintained its long-term confidence in the company’s structural cost efficiencies and pricing power.
Management reiterated a target of 200 basis points of adjusted EBIT margin expansion through 2026, with first-quarter 2025 efficiency savings coming in 17% higher than the same period a year ago.
However, the current macroeconomic environment remains subdued, particularly across Europe, which continues to weigh on volume growth in core segments.
Organic sales growth in the first quarter was 1.7% year-over-year. In Gases & Services, which comprise the bulk of revenue, growth was 1.8%.
Regionally, the Americas posted 2% growth excluding the impact of Argentina’s hyperinflation, while the EMEA region contracted by 1%. APAC grew 3%.
Performance by segment was mixed. The Industrial Merchant business, which accounts for 46% of Gases & Services revenue, grew by 1%, with pricing gains of 2.5% offset by volume declines.
Large Industries was flat year-over-year despite new plant ramps in the U.S. and China, due to ongoing weakness in European chemicals and steel. Electronics grew 4%, supported by strong gains in Carrier Gases. Healthcare, a defensive segment, continued to perform well with 5% growth.
Air Liquide’s project backlog, a key indicator of future growth, expanded to €4.5 billion in the first quarter, up from €4.2 billion in the previous quarter, aided by new take-or-pay contracts, including with ExxonMobil (NYSE:XOM).
In a recession scenario modeled by J.P. Morgan, 2026 group sales could fall to €27.4 billion from the base estimate of €29.3 billion, and adjusted EPS could drop to €6.78.
Even under this adverse scenario, the company’s margins are expected to remain resilient, with EBIT margin at 21.3%, slightly below the base case of 21.7%.