Air Products & Chemicals stock price target raised to $335 by TD Cowen

Air Products & Chemicals (APD) reported Q3 FY25 adjusted EPS and revenue that exceeded consensus, leading TD Cowen to raise its price target to $335. However, the company maintained its full-year guidance midpoint and lowered its fiscal Q4 outlook by 3% below consensus, citing economic uncertainty and significant headwinds in its helium business, which is projected to contract 4-5% year-over-year and impact full-year EPS by $0.55-$0.60. In response to these challenges, APD increased its targeted annual cost savings program to $185-$195 million.

Analysis

Air Products & Chemicals (APD) delivered a mixed operational update, reporting fiscal third-quarter adjusted EPS of $3.09 and revenue of $3.02 billion, which surpassed consensus estimates by 3% and 1.3% respectively. This outperformance, driven by its base business with strength in Asia and Europe, prompted TD Cowen to raise its price target to $335. However, this positive result is offset by a cautious management outlook. The company maintained its full-year guidance midpoint and issued fiscal fourth-quarter guidance 3% below consensus, citing broad economic uncertainty. A significant headwind is the challenged helium business, which is projected to contract 4-5% year-over-year and negatively impact full-year EPS by $0.55 to $0.60, a pressure point TD Cowen notes is more severe for APD than its competitors. In response, management has expanded its cost-reduction program to target $185-195 million in annual savings. While the company's long-term financial stability is underscored by 55 consecutive years of dividend payments, the near-term outlook is clouded by these specific operational challenges and a lack of new updates on resolving underperforming projects.

Key Decisions for Investors

• Investors should weigh the current earnings beat and raised price target against the company's cautious forward guidance and significant, quantified headwinds in the helium business.
• Monitor the execution and impact of the expanded cost-saving program, as its success is critical to offsetting the margin pressure from the contracting helium segment.
• Given the assessment that APD is the 'hardest hit' by helium issues, it is prudent to compare its upcoming performance against key competitors to discern company-specific risks from broader industry trends.
• For income-oriented investors, the 55-year dividend history remains a key pillar, but attention should be paid to whether the EPS impact from operational challenges could threaten future dividend growth.