Group 1 - Air Products and Chemicals, Inc. (APD) is initiated with a Strong Buy rating and a price target of $368, indicating a positive outlook for the company [1] - APD provides atmospheric and process gases, related equipment, and services across various sectors including energy, manufacturing, healthcare, and advanced technologies globally [1] - Moretus Research focuses on identifying companies with durable business models and mispriced cash flow potential, applying a structured framework for investment analysis [1] Group 2 - Moretus Research emphasizes rigorous fundamental analysis combined with a judgment-driven process, aiming to filter out noise and overly complex forecasting [1] - The research coverage targets underappreciated companies undergoing structural changes or temporary dislocations, which can lead to asymmetric returns for investors [1] - The valuation approach is based on sector-relevant multiples tailored to each company's business model and capital structure, prioritizing comparability and relevance [1]

Core Insights - Air Products will present its industrial gas solutions and technologies at the PowderMet2025 International Conference from June 15-18 in Phoenix, Arizona [1] - The company aims to assist metal processors in enhancing product quality, reducing operating costs, increasing production, and optimizing gas usage through its Smart Technology systems [2][5] - Reed Hendershot, a Senior Engineer at Air Products, will lead a technical session on improving sintering atmosphere and process during the conference [3] Company Overview - Air Products has over 80 years of experience in the industrial gases sector, serving various industries including refining, chemicals, metals, electronics, manufacturing, medical, and food [7] - The company is recognized as the leading global supplier of hydrogen and is involved in large-scale clean hydrogen projects, contributing to the transition to low- and zero-carbon energy [7] - In fiscal 2024, Air Products reported sales of $12.1 billion and operates in approximately 50 countries, with a market capitalization exceeding $60 billion [8]

Group 1 - The article discusses the top 100 sustainable companies identified by Calvert Research and Management based on an annual review of over 230 Environmental, Social, and Governance (ESG) performance indicators [1] - Key ESG performance indicators include workplace diversity, data security, and greenhouse-gas emissions [1] - The article emphasizes the importance of sustainable investing and highlights the growing interest in companies that prioritize ESG factors [1]

Financial Performance - For the three months ended March 31, 2025, Air Products reported sales of $2,916.2 million, a slight decrease of 0.5% compared to $2,930.2 million in the same period of 2024 [16]. - The net loss attributable to Air Products for the three months ended March 31, 2025, was $1,730.6 million, compared to a net income of $572.4 million in the same period of 2024, representing a significant decline [16]. - The company reported a comprehensive loss of $1,673.7 million for the three months ended March 31, 2025, compared to a comprehensive income of $487.8 million in the same period of 2024 [18]. - The company reported a net loss of $1,730.6 million for the three months ended March 31, 2025, compared to a net income of $572.4 million for the same period in 2024 [27]. - The basic earnings per share for the three months ended March 31, 2025, was ($7.77), a significant decrease from $2.57 in the prior year [128]. - The company reported a total of $5,847.7 million in sales for the six months ended March 31, 2025, compared to $5,927.6 million for the same period in 2024 [88]. Expenses and Costs - Research and development expenses decreased to $22.9 million for the three months ended March 31, 2025, down from $25.4 million in the same period of 2024, indicating a focus on cost management [16]. - The company incurred shareholder activism-related costs of $31.4 million for the three months ended March 31, 2025, which were not present in the same period of 2024 [16]. - The company recorded project exit costs of $2.861 billion during the second quarter of fiscal year 2025, primarily related to clean energy projects in the Americas segment [60]. - A project exit charge of approximately $1.8 billion was recorded due to the termination of the Master Project Agreement with World Energy, including $1.4 billion for asset write-downs [56]. - The company incurred business and asset actions costs of $2,927.9 million for the three months ended March 31, 2025, compared to $57.0 million in the same period of 2024 [16]. Assets and Liabilities - The total current assets decreased to $5,187.6 million as of March 31, 2025, from $6,363.0 million as of September 30, 2024, reflecting a reduction in cash and cash equivalents [21]. - Total liabilities increased to $22,093.3 million as of March 31, 2025, compared to $20,900.9 million as of September 30, 2024, indicating a rise in financial obligations [21]. - The company’s total equity decreased to $16,779.6 million as of March 31, 2025, down from $18,673.7 million as of September 30, 2024, reflecting the impact of the net loss [21]. - Total assets as of March 31, 2025, were $38,872.9 million, down from $39,574.6 million on September 30, 2024 [16]. - Long-term debt increased from $13,428.6 million as of September 30, 2024, to $14,153.1 million as of March 31, 2025, an increase of approximately 5.4% [21]. Cash Flow and Investments - Cash provided by operating activities decreased to $1,139.8 million for the six months ended March 31, 2025, down from $1,428.3 million in the prior year, reflecting a reduction of approximately 20.2% [23]. - Total cash used for investing activities increased to $4,419.4 million in the first half of 2025, compared to $3,226.0 million in the same period of 2024, marking a rise of about 37.0% [23]. - The balance of cash and cash items at the end of the period was $1,491.4 million, down from $2,535.0 million at the end of March 2024, indicating a decrease of approximately 41.1% [23]. - Cash payments related to unpaid benefits amounted to $23.9 million, with a remaining liability of $75.3 million expected to be resolved by the end of the second quarter of fiscal year 2026 [64]. Shareholder and Equity Information - Dividends paid to shareholders for the six months ended March 31, 2025, totaled $792.1 million, slightly up from $782.5 million in the same period of 2024 [25]. - The company’s total equity as of March 31, 2025, was $16,779.6 million, a decrease from $18,673.7 million as of September 30, 2024 [25]. - Dividends on common stock were $398.3 million, with a dividend per share of $1.79, compared to $393.5 million and $1.77 per share in the previous year [27]. Project and Joint Ventures - The NEOM Green Hydrogen Company joint venture has secured project financing of approximately $6.1 billion, expected to fund about 73% of the project costs [45]. - As of March 31, 2025, total assets associated with the NEOM Green Hydrogen Company amounted to $6.225 billion, an increase from $4.394 billion as of September 30, 2024 [48]. - The carrying value of the investment in the Jazan Integrated Gasification and Power Company joint venture was $3.060 billion as of March 31, 2025 [52]. - The NEOM Green Hydrogen Project is a multi-billion dollar facility powered by renewable energy, producing green ammonia for Air Products under a long-term agreement [42]. Tax and Regulatory Matters - Income tax payments, net of refunds, increased to $710.1 million for the six months ended March 31, 2025, compared to $321.8 million for the same period in 2024 [135]. - The effective tax rate for the three months ended March 31, 2025, was 22.5%, reflecting a tax benefit of $505.8 million on pre-tax losses [129]. - The company is evaluating the impact of new accounting guidance on climate-related disclosures, which may take effect in fiscal year 2026 [37]. - The company plans to adopt the new segment reporting standards effective for the fiscal year ending September 30, 2025, expanding segment financial information disclosures [38].

Core Viewpoint - Air Products and Chemicals, Inc. (APD) shares declined by 2% as investors reacted to disappointing results and guidance [1] Group 1: Company Performance - The company has experienced significant turmoil in recent months, including an activist fight and the departure of a long-tenured executive [1]

Core Viewpoint - Air Products and Chemicals, Inc. reported a significant loss in Q2 fiscal 2025, with adjusted earnings per share falling short of expectations due to lower volumes and higher costs, despite some favorable pricing [1][2][6]. Financial Performance - The company recorded a loss of $7.77 per share compared to earnings of $2.57 per share in the same quarter last year [1]. - Adjusted earnings per share were $2.69, missing the Zacks Consensus Estimate of $2.84, and fell 6% from the prior-year quarter [1]. - Revenues totaled $2,916.2 million, down approximately 0.5% year-over-year, and also below the Zacks Consensus Estimate of $2,950.1 million [2]. - Operating income decreased by 2% to $366 million due to higher expenses from planned maintenance [3]. Segment Performance - In the Americas segment, revenues increased by 3.3% year-over-year to $1,287.2 million, but missed the consensus estimate of $1,350 million [2]. - The Europe segment saw revenues rise by 8.9% to $727.4 million, exceeding the consensus estimate of $686 million, although operating income declined by 3% [3]. - The Asia segment experienced a revenue decline of 0.7% to $774.1 million, falling short of the consensus estimate of $782 million, with operating income down 6% [4]. Financial Position - Cash and cash equivalents at the end of the quarter were $1,491.4 million, a decrease of about 19% from the previous quarter [5]. - Long-term debt increased by approximately 7.5% sequentially to $14,153.1 million [5]. Outlook - The company revised its full-year fiscal 2025 adjusted EPS outlook to a range of $11.85 to $12.15, with expectations of adjusted EPS between $2.90 and $3.00 for Q3 fiscal 2025 [6]. - Anticipated capital expenditures for fiscal 2025 are around $5 billion [6]. Stock Performance - Air Products' shares have increased by 14.1% over the past year, contrasting with a 24.7% decline in the industry [7].

Core Insights - Air Products and Chemicals (APD) reported revenue of $2.92 billion for the quarter ended March 2025, reflecting a year-over-year decline of 0.5% and an EPS of $2.69, down from $2.85 a year ago [1] - The reported revenue fell short of the Zacks Consensus Estimate of $2.95 billion, resulting in a surprise of -1.15%, while the EPS also missed the consensus estimate of $2.84 by -5.28% [1] Revenue Breakdown - Revenue from the Americas was $1.29 billion, below the average estimate of $1.35 billion, marking a year-over-year increase of +3.3% [4] - Revenue from the Middle East and India was $32.80 million, compared to the average estimate of $35.24 million, representing a year-over-year decline of -8.1% [4] - Revenue from Europe reached $727.40 million, exceeding the average estimate of $685.93 million, with a year-over-year increase of +8.9% [4] - Revenue from Asia was $774.10 million, slightly below the average estimate of $781.77 million, indicating a year-over-year change of -0.7% [4] Stock Performance - Shares of Air Products and Chemicals have returned -8.1% over the past month, contrasting with the Zacks S&P 500 composite's -0.7% change [3] - The stock currently holds a Zacks Rank 3 (Hold), suggesting it may perform in line with the broader market in the near term [3]

Core Viewpoint - Air Products and Chemicals reported quarterly earnings of $2.69 per share, missing the Zacks Consensus Estimate of $2.84 per share, and down from $2.85 per share a year ago [1][2] Financial Performance - The company posted revenues of $2.92 billion for the quarter ended March 2025, missing the Zacks Consensus Estimate by 1.15%, and down from $2.93 billion year-over-year [3] - The earnings surprise for the quarter was -5.28%, and the company has not beaten consensus revenue estimates over the last four quarters [2][3] Stock Performance - Air Products and Chemicals shares have declined approximately 6.5% since the beginning of the year, compared to a decline of 5.3% for the S&P 500 [4] - The current Zacks Rank for the stock is 3 (Hold), indicating expected performance in line with the market in the near future [7] Future Outlook - The current consensus EPS estimate for the upcoming quarter is $3.31 on revenues of $3.03 billion, and for the current fiscal year, it is $12.65 on revenues of $12.15 billion [8] - The estimate revisions trend for the company is mixed, and future earnings expectations will be influenced by management's commentary on the earnings call [5][6] Industry Context - The Chemical - Diversified industry, to which Air Products and Chemicals belongs, is currently in the bottom 17% of over 250 Zacks industries, indicating potential challenges ahead [9]

Financial Data and Key Metrics Changes - The second quarter adjusted earnings per share (EPS) was $2.69, below the previous guidance of $2.75 to $2.85, primarily due to changes in cost estimates and lower helium contributions [21][24] - Sales volume decreased by 3%, with 2% attributed to the LNG business divestment, while total company price increased by 1% [21][22] - Adjusted operating income decreased by 9%, mainly due to the LNG divestiture and unfavorable helium impact, with operating margin down by 210 basis points [22][24] Business Line Data and Key Metrics Changes - The core industrial gas business generated approximately $12 billion in sales with an operating margin of 24% [6] - The LNG divestiture accounted for a $0.12 headwind on EPS, while helium volume was down, largely offset by favorable on-site volumes [22][23] - The company anticipates base business growth of 2% to 5% for the fiscal year despite a 5% headwind from helium [24] Market Data and Key Metrics Changes - The company has seen a slight uptick in manufacturing before tariffs were implemented, but expects a negative impact moving forward, particularly in the U.S. and China [96] - The helium market has become more cyclical, with operating income still higher than pre-COVID levels despite recent declines [81] Company Strategy and Development Direction - The company plans to refocus on its core industrial gas business and aims to invest about $1.5 billion per year in industrial gas projects going forward [11][19] - There is a commitment to return to operational excellence and improve margins through disciplined cost productivity and pricing [6][11] - The company intends to pursue clean energy opportunities that align with its traditional industrial gases model, focusing on projects with contracted take-or-pay agreements [7][19] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding the green hydrogen project in Saudi Arabia and the blue hydrogen facility in Louisiana, emphasizing the need for firm off-take agreements before proceeding [12][19] - The company expects to achieve high single-digit adjusted EPS growth and improved operating margins in the coming years, despite challenges from underperforming projects [18][19] - Management acknowledged the importance of transparent communication with investors and emphasized a disciplined approach to capital allocation [19] Other Important Information - The company has identified approximately 2,400 positions for reduction, aiming for a run rate of around $100 million in savings from these actions [51] - The total cost for the previously announced net zero hydrogen project in Edmonton is now expected to be $3.3 billion, with operations starting between late 2027 and early 2028 [15] Q&A Session Summary Question: What is the EBITDA contribution from underperforming projects? - Management expects to recover capital on an undiscounted basis, indicating that the EBITDA contribution will not meet initial expectations due to significant capital increases [27][28] Question: What is the status of the Alberta project and its cost overruns? - Management acknowledged self-inflicted issues leading to delays and cost increases, emphasizing the need for improved project management and contractor performance [29][30] Question: How does the company view its gasification projects? - The EPS contribution from gasification projects in China has been close to zero, with management focusing on optimizing underperforming assets [33][35] Question: What is the rationale for continuing the Louisiana project? - The company aims to reduce total CapEx while focusing on hydrogen production, with plans to potentially divest non-core elements of the project [40][41] Question: What are the expected cash flow trends over the next few years? - Management anticipates being cash flow positive as early as next year, with a focus on maintaining a neutral cash flow position [76][104]

Financial Data and Key Metrics Changes - The second quarter adjusted earnings per share (EPS) was $2.69, below previous guidance of $2.75 to $2.85, primarily due to changes in cost estimates and lower helium contributions [20][24] - Sales volume decreased by 3%, with 2% attributed to the LNG business divestment, while total company price increased by 1% [20][21] - Adjusted operating income decreased by 9%, mainly due to LNG divestiture and unfavorable helium impact, with operating margin down by 210 basis points [21][22] Business Line Data and Key Metrics Changes - The core industrial gas business generated approximately $12 billion in sales with an operating margin of 24% [6] - The LNG business divestiture accounted for a $0.12 headwind on EPS, while helium volume was down, offset by favorable on-site volumes [22][23] - The company anticipates base business growth of 2% to 5% for the fiscal year despite a 5% headwind in helium [24] Market Data and Key Metrics Changes - The company has become the leading supplier of hydrogen and high purity gases for the electronics industry, with significant pipeline networks in the U.S. Gulf Coast [4][5] - The company expects to unlock significant potential with projects in Saudi Arabia and Louisiana, aiming for a 30% adjusted operating margin by 2030 [17][18] Company Strategy and Development Direction - The company plans to refocus on its core industrial gas business and invest approximately $1.5 billion per year in industrial gas projects [10][11] - The strategy includes canceling underperforming projects and prioritizing high-return opportunities with contracted take-or-pay agreements [12][14] - The company aims to maximize profitability through operational excellence and rightsizing the organization [15][17] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding green hydrogen projects in Saudi Arabia and Louisiana, focusing on derisking strategies [11][12] - The company anticipates high single-digit adjusted EPS growth and improved operating margins in the coming years, despite challenges from underperforming projects [17][18] - Management emphasized the importance of transparent communication with investors and a disciplined approach to capital allocation [18] Other Important Information - The company has identified approximately 2,400 positions for reduction, aiming for a run rate of around $100 million in savings from FY 2025 actions [50][51] - The total cost for the net zero hydrogen project in Edmonton is now expected to be $3.3 billion, with a projected on-stream date between late 2027 and early 2028 [14] Q&A Session Summary Question: What is the EBITDA contribution from underperforming projects? - Management expects to recover capital on an undiscounted basis, indicating a challenging situation with significant increases in capital costs [28][29] Question: What is the status of the Alberta project? - The Alberta project has faced delays and cost overruns due to construction challenges and contractor productivity issues [29][31] Question: What is the rationale for pursuing ammonia in Louisiana? - The company is considering focusing solely on hydrogen, aiming to reduce total CapEx while securing firm offtake agreements [40][41] Question: What is the expected contribution from helium? - Helium remains a volatile earnings contributor, with expectations of continued headwinds in pricing through 2026 and 2027 [78][80] Question: What are the cash flow expectations for 2026? - The company anticipates being cash flow positive, including dividends, with a focus on managing capital expenditures effectively [74][86]