Core Insights - Air Products and Chemicals, Inc. has experienced a tumultuous year marked by an activist fight, a change in CEO, and a significant strategic shift after years of costly investments in clean energy [1] Group 1 - The company has undergone a leadership change, which is indicative of internal challenges and a potential shift in strategic direction [1] - The activist fight suggests that there may be disagreements among stakeholders regarding the company's direction and performance [1] - The announcement of a massive strategy change indicates a response to previous costly investments, highlighting the need for a reevaluation of business priorities in the clean energy sector [1]

Core Viewpoint - Air Products and Chemicals reported a slight increase in revenue for the quarter ended June 2025, but a decrease in earnings per share compared to the previous year [1]. Financial Performance - Revenue for the quarter was $3.02 billion, reflecting a year-over-year increase of 1.3% [1]. - Earnings per share (EPS) was reported at $3.09, down from $3.20 in the same quarter last year [1]. - The revenue matched the Zacks Consensus Estimate of $3.02 billion, resulting in a surprise of +0.18% [1]. - The EPS exceeded the consensus estimate of $2.98, with a surprise of +3.69% [1]. Regional Revenue Breakdown - Middle East and India: Revenue was $38.3 million, surpassing the estimated $33.8 million, representing a year-over-year increase of +16.8% [4]. - Europe: Revenue reached $770.5 million, exceeding the average estimate of $747.57 million, with a year-over-year change of +11.1% [4]. - Asia: Revenue was $810 million, slightly above the estimated $801.34 million, reflecting a +2.6% change year over year [4]. - Americas: Revenue totaled $1.26 billion, below the average estimate of $1.33 billion, with a year-over-year increase of +2.1% [4]. Stock Performance - Over the past month, shares of Air Products and Chemicals returned -0.1%, while the Zacks S&P 500 composite increased by +2.7% [3]. - The stock currently holds a Zacks Rank 4 (Sell), indicating potential underperformance relative to the broader market in the near term [3].

Financial Data and Key Metrics Changes - Adjusted earnings per share (EPS) for the third quarter was $3.09, exceeding guidance and higher than the previous year, excluding the impact of LNG business sales [4][8] - Sales volume decreased by 4% year-over-year, primarily due to the sale of the LNG business and lower helium demand [8][10] - Total company price increased by 1%, with a 2% improvement for the merchant business [8][10] - Adjusted operating income remained unchanged, with operating margin flat but improved by approximately 300 basis points sequentially due to favorable volume and productivity improvements [9][10] Business Line Data and Key Metrics Changes - The core industrial gas business showed resilience, with strong performance in non-helium products across all regions [4][9] - Helium EPS contributions were down about 4% versus the prior year, with an anticipated headwind of around 55 to 60 cents for the full year [24][25] - The company is executing a global cost reduction plan expected to generate annual savings of $185 to $195 million [5][30] Market Data and Key Metrics Changes - The Americas experienced a 6% decline in volume, primarily due to project exits and lower helium demand, although strong on-site volumes were noted [36][38] - The company anticipates that the helium market may stabilize in the coming years, despite current down cycles [66][70] Company Strategy and Development Direction - The company aims for high single-digit adjusted EPS growth starting in fiscal year 2026, with a target of operating margins of 30% and return on capital employed (ROCE) in the mid to high teens by 2030 [7][8] - Investments are being made in AI and digital transformation tools to enhance productivity [6][30] - The company is focused on disciplined capital allocation and project execution, particularly in hydrogen and electronics sectors [6][8] Management's Comments on Operating Environment and Future Outlook - Management remains cautious about the economic outlook, recognizing significant global uncertainties [11] - The company is optimistic about the competitiveness of its projects, particularly in the blue ammonia market [16][51] - Inflation and tariffs are ongoing concerns, impacting pricing strategies [82] Other Important Information - The company has committed to reducing headcount by about 10% as part of its productivity actions, with approximately 60% of this process completed [30] - Capital expenditures for the fiscal year are expected to be around $5 billion [11] Q&A Session Summary Question: Update on the plan to use third parties at Darrow for ammonia and carbon capturing - Management is optimistic about finalizing partnerships by the end of the current year, with competitive CapEx numbers for their projects [14][16] Question: Average prices year over year and dissociation characteristics - Management did not disclose specific numbers but indicated that helium continues to be a headwind, and the goal for dissociation remains a 10% loss [20][21][24] Question: Cost opportunities and digital initiatives - The cost opportunities discussed are in addition to previously outlined savings, with a focus on digital and energy management initiatives [28][30][32] Question: Volume performance in the Americas - The decline in volume was primarily due to project exits and lower helium demand, with strong performance in other areas [35][38] Question: Update on low-risk projects and bidding activity - Management continues to see project activity, particularly in electronics in Asia, and will provide updates on smaller projects in future calls [44][46] Question: Long-term return on capital employed goals - Current ROC is around 11.1%, with expectations to improve as capital expenditures are reduced and cash generation increases [78][80] Question: Helium market cycle outlook - Management believes the helium market may stabilize, but significant changes in supply and demand dynamics are expected [66][70] Question: Update on underperforming projects - Projects in Edmonton, Rotterdam, and Arizona are on schedule, with no significant changes anticipated [86][88]

Financial Data and Key Metrics Changes - Adjusted earnings per share (EPS) for Q3 2025 was $3.09, exceeding guidance and higher than the previous year, excluding LNG business sales impact [2][6] - Sales volume decreased by 4% year-over-year, primarily due to the sale of the LNG business and lower helium demand [6][7] - Total company price increased by 1%, with a 2% improvement in the merchant business [6][7] - Adjusted operating income remained unchanged, with operating margin flat but improved by approximately 300 basis points sequentially due to favorable volume and productivity improvements [7][8] Business Line Data and Key Metrics Changes - The core industrial gas business showed resilience, with strong performance in non-helium products across all regions [2][7] - Helium EPS contributions were down about 4% versus the prior year, with an anticipated headwind of around 55 to 60 cents for the full year [23] Market Data and Key Metrics Changes - The Americas experienced a 6% decline in volume, primarily due to project exits and lower helium demand, although strong on-site volumes were noted [34][35] - The company expects to see improvements in overall merchant business outside of helium demand [35] Company Strategy and Development Direction - The company aims for high single-digit adjusted EPS growth starting in fiscal year 2026, with a target of achieving operating margins of 30% and return on capital employed (ROCE) in the mid to high teens by 2030 [5][6] - A global cost reduction plan is expected to generate annual savings of $185 to $195 million, with a focus on digital transformation and AI tools to enhance productivity [3][4][30] Management's Comments on Operating Environment and Future Outlook - Management remains cautious about the economic outlook, recognizing significant global uncertainties [10] - The company is optimistic about the competitiveness of its projects, particularly in the blue ammonia market, and is actively seeking partnerships for future projects [15][49] Other Important Information - The fiscal full-year adjusted EPS guidance is maintained at $11.90 to $12.10, with capital expenditures expected to be approximately $5 billion [10] - The company is committed to maintaining capital discipline while pursuing growth opportunities in its core industrial gas business [4][6] Q&A Session Summary Question: Update on the plan to use third parties at Darrow for ammonia and carbon capturing - Management is optimistic about finalizing partnerships by the end of the current year, with competitive CapEx numbers for their projects [14][15] Question: Average prices year-over-year and helium impact - Management indicated that they typically do not disclose specific numbers but acknowledged helium's impact on pricing [18][20] Question: Volume performance in the Americas - The decline was largely due to project exits and helium demand, with strong on-site volumes noted [34][35] Question: Update on larger project announcements in the Gulf Coast - Management believes there is still demand for clean ammonia, particularly in the Far East, and expects competitive positioning for their projects [48][49] Question: Trajectory to achieve long-term ROCE goals - Current ROCE is around 11.1%, with expectations to improve as capital expenditures are reduced and cash balances increase [70][72] Question: Inflation impact on costs - Management continues to see inflation as a concern, with ongoing efforts to manage pricing effectively [76][77] Question: Update on underperforming projects - Projects in Edmonton, Rotterdam, and Arizona are on schedule, with no significant changes expected [80][81]

Core Viewpoint - Air Products and Chemicals (APD) reported quarterly earnings of $3.09 per share, exceeding the Zacks Consensus Estimate of $2.98 per share, but down from $3.20 per share a year ago [1][2] Financial Performance - The company achieved revenues of $3.02 billion for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 0.18% and showing an increase from $2.99 billion year-over-year [3] - The earnings surprise for the quarter was +3.69%, while the previous quarter saw a surprise of -5.28% [2] Market Performance - Air Products and Chemicals shares have remained flat since the beginning of the year, contrasting with the S&P 500's gain of 8.2% [4] - The stock currently holds a Zacks Rank 4 (Sell), indicating expectations of underperformance in the near future [7] Future Outlook - The current consensus EPS estimate for the upcoming quarter is $3.48 on revenues of $3.22 billion, and for the current fiscal year, it is $12.03 on revenues of $12.07 billion [8] - The industry outlook is unfavorable, with the Chemical - Diversified sector ranking in the bottom 6% of over 250 Zacks industries, which may impact stock performance [9]

Financial Performance - Q3 2025 adjusted EPS was $3.09, a decrease of 3% compared to Q3 2024[14, 19] - Q3 2025 adjusted operating income was $741 million, flat compared to Q3 2024[14] - Q3 2025 adjusted operating income margin was 24.5%, flat compared to Q3 2024[14] - The company forecasts FY2025 capital expenditures to be approximately $5.0 billion[25] Sales Analysis - Overall sales increased by 1% compared to Q3 2024 and 4% compared to Q2 2025[16] - Volume decreased by 4% compared to Q3 2024 but increased by 4% compared to Q2 2025[16] - Sales in Americas increased 2% vs Q3FY24 but decreased 2% vs Q2FY25[33] - Sales in Asia increased 3% vs Q3FY24 and 5% vs Q2FY25[38] - Sales in Europe increased 11% vs Q3FY24 and 6% vs Q2FY25[43] Future Outlook - The company projects FY2025 adjusted EPS to be in the range of $11.90 to $12.10, a decrease of 4% to 3% compared to FY24[10, 25] - Q4 FY2025 adjusted EPS is projected to be between $3.27 and $3.47, representing an 8% to 3% decrease compared to Q4 FY24[25]

Fiscal 2025 Third Quarter Performance Overview [Consolidated Financial Results](index=1&type=section&id=Consolidated%20Financial%20Results) Air Products reported **$3.0 billion** sales (+1%), GAAP EPS up **4%** to **$3.24**, and Adjusted EPS down **3%** to **$3.09** in Q3 FY25 Consolidated Financial Performance | Metric | Q3 FY25 | Q3 FY24 | Change | | :--- | :--- | :--- | :--- | | Sales | $3.0B | $2.99B | +1% | | GAAP EPS | $3.24 | $3.13 | +4% | | Adjusted EPS | $3.09 | $3.20 | -3% | | GAAP Operating Income | $791M | $738M | +7% | | Adjusted Operating Income | $741M | $741M | Flat | - Sales growth was primarily driven by **3% higher energy cost pass-through**, **1% higher pricing**, and **1% favorable currency**, partially offset by **4% lower volumes** due to the **September 2024 LNG sale**, **lower global helium demand**, and **project exits**[5](index=5&type=chunk) - GAAP results included **$99 million pre-tax gains from asset sales**, partially offset by **$25 million shareholder activism-related costs** and a **$24 million charge for project exit cost updates**[3](index=3&type=chunk) - CEO Eduardo Menezes highlighted that results exceeded guidance and were higher than the previous year on a comparable basis, excluding the LNG sale impact, with a focus on cost productivity, pricing, operational excellence, and capital discipline[7](index=7&type=chunk) [Business Segment Performance](index=2&type=section&id=Business%20Segment%20Performance) Americas operating income declined **4%** despite a **2%** sales increase, while Asia and Europe segments reported sales and operating income growth Q3 FY25 Business Segment Performance Overview | Region | Sales Change (YoY) | Operating Income Change (YoY) | Key Drivers | | :--- | :--- | :--- | :--- | | Americas | +2% | -4% | Higher energy pass-through offset by lower volumes and higher maintenance costs | | Asia | +3% | +8% | Higher on-site volumes and favorable costs from productivity | | Europe | +11% | +10% | Favorable currency, higher volumes, and higher pricing | | Corporate & Other | -39% | +46% (Loss) | Primarily due to the September 2024 LNG sale | [Company Outlook and Guidance](index=1&type=section&id=Company%20Outlook%20and%20Guidance) Air Products revised its full-year FY25 Adjusted EPS guidance to **$11.90-$12.10** and forecasts approximately **$5 billion** in capital expenditures Fiscal 2025 Company Guidance | Guidance Metric | Period | Range/Amount | | :--- | :--- | :--- | | Adjusted EPS | Q4 FY25 | $3.27 - $3.47 | | Adjusted EPS | Full-Year FY25 | $11.90 - $12.10 (Revised) | | Capital Expenditures | Full-Year FY25 | ~$5 billion | Financial Statements [Consolidated Income Statements](index=4&type=section&id=Consolidated%20Income%20Statements) Q3 FY25 sales reached **$3.02 billion**, with net income attributable to Air Products at **$713.8 million** and diluted EPS of **$3.24** Consolidated Income Statement Highlights | (In Millions USD, except per share data) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Sales | $3,022.7 | $2,985.5 | | Operating Income | $790.6 | $737.6 | | Net Income Attributable to Air Products | $713.8 | $696.6 | | Diluted EPS from Continuing Operations | $3.24 | $3.13 | [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) As of June 30, 2025, total assets increased to **$41.7 billion**, total liabilities rose to **$23.9 billion**, and cash decreased to **$2.3 billion** Consolidated Balance Sheet Highlights | (In Millions USD) | June 30, 2025 | September 30, 2024 | | :--- | :--- | :--- | | Cash and cash items | $2,324.3 | $2,979.7 | | Total Assets | $41,659.1 | $39,574.6 | | Total Liabilities | $23,891.1 | $20,900.9 | | Total Equity | $17,768.0 | $18,673.7 | [Consolidated Statements of Cash Flows](index=6&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For the nine months ended June 30, 2025, operating cash flow was **$2.0 billion**, investing activities used **$5.7 billion**, and financing activities provided **$3.0 billion** Consolidated Cash Flow Highlights | (In Millions USD) | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :--- | :--- | :--- | | Cash Provided by Operating Activities | $1,995.6 | $2,689.7 | | Cash Used for Investing Activities | ($5,681.0) | ($4,773.8) | | Cash Provided by Financing Activities | $3,034.3 | $2,847.7 | | (Decrease) Increase in cash | ($655.4) | $758.7 | Non-GAAP Financial Measures and Reconciliations [Overview of Non-GAAP Measures](index=9&type=section&id=Overview%20of%20Non-GAAP%20Measures) Non-GAAP measures like adjusted operating income and EPS are used to provide insights into underlying business performance by excluding non-recurring items - Management provides non-GAAP financial measures to allow for a more complete understanding of factors and trends affecting historical and future performance, consistent with their own evaluation methods[28](index=28&type=chunk) - Non-GAAP measures are typically determined by adjusting the comparable GAAP measure to exclude gains or losses not believed to be representative of underlying business performance, such as non-service pension costs[29](index=29&type=chunk) [Detailed Non-GAAP Adjustments](index=9&type=section&id=Detailed%20Non-GAAP%20Adjustments) Q3 FY25 non-GAAP adjustments included charges for project exits and shareholder activism, offset by gains from asset and business sales [Business and Asset Actions](index=9&type=section&id=Business%20and%20Asset%20Actions) An additional **$24.1 million** pre-tax charge (**$0.07 per share**) was recorded in Q3 for updated project exit cost estimates - An additional charge of **$24.1 million** (**$0.07 per share**) was recorded in Q3 based on updated cost estimates for previously announced project exits[32](index=32&type=chunk) [Shareholder Activism-Related Costs](index=9&type=section&id=Shareholder%20Activisim-Related%20Costs) **$25.0 million** (**$0.08 per share**) in costs were incurred in Q3 due to a proxy contest, primarily reimbursing Mantle Ridge LP - Recorded **$25.0 million** (**$0.08 per share**) in Q3 for costs connected to a proxy contest, mainly for reimbursing Mantle Ridge LP[34](index=34&type=chunk) [Gain on Sale of Business and Other Assets](index=10&type=section&id=Gain%20on%20Sale%20of%20Business%20and%20Other%20Assets) Pre-tax gains of **$67.3 million** (**$0.23 per share**) from a Singapore subsidiary sale and **$31.3 million** (**$0.11 per share**) from an England office sale were recognized - Completed the sale of a subsidiary in Singapore, recognizing a gain of **$67.3 million** (**$0.23 per share**)[35](index=35&type=chunk) - Sold a regional office in England, resulting in a gain of **$31.3 million** (**$0.11 per share**)[36](index=36&type=chunk) [Other Adjustments (Hedges, Pension, Discontinued Ops)](index=10&type=section&id=Other%20Adjustments%20(Hedges,%20Pension,%20Discontinued%20Ops)) Other adjustments included **$10.9 million** (**$0.04 per share**) in non-service pension costs and a **$10.6 million** (**$0.04 per share**) loss from discontinued operations - Non-service related pension items resulted in a net cost of **$10.9 million** (**$0.04 per share**) for the quarter[38](index=38&type=chunk) - A loss from discontinued operations of **$10.6 million** (**$0.04 per share**) was recorded, primarily for environmental liabilities from a business sold in 2008[39](index=39&type=chunk) [Reconciliation of Adjusted Operating Income and Adjusted EPS](index=11&type=section&id=Reconciliation%20of%20Adjusted%20Operating%20Income%20and%20Adjusted%20EPS) Q3 FY25 GAAP EPS of **$3.24** was reconciled to an Adjusted EPS of **$3.09**, representing a **3% decrease** from the prior year Adjusted EPS Reconciliation | Reconciliation Item (per share) | Q3 FY25 Impact | | :--- | :--- | | **GAAP EPS** | **$3.24** | | Business and asset actions | +$0.07 | | Shareholder activism-related costs | +$0.08 | | Gain on sale of business | -$0.23 | | Gain on sale of other assets | -$0.11 | | Non-service pension cost, net | +$0.04 | | **Adjusted EPS** | **$3.09** | | **Q3 FY24 Adjusted EPS** | **$3.20** | | **% Adjusted Change** | **(3%)** | [Reconciliation of Adjusted EBITDA](index=12&type=section&id=Reconciliation%20of%20Adjusted%20EBITDA) Consolidated Adjusted EBITDA increased **3%** to **$1,309.7 million** in Q3 FY25, with Asia and Europe segments showing significant growth Adjusted EBITDA by Segment | (In Millions USD) | Q3 FY25 | Q3 FY24 | % Change | | :--- | :--- | :--- | :--- | | **Consolidated Adjusted EBITDA** | **$1,309.7** | **$1,266.8** | **+3%** | | Americas Adjusted EBITDA | $604.3 | $604.2 | —% | | Asia Adjusted EBITDA | $353.0 | $324.3 | +9% | | Europe Adjusted EBITDA | $319.8 | $283.2 | +13% | [Reconciliation of Capital Expenditures](index=14&type=section&id=Reconciliation%20of%20Capital%20Expenditures) Capital expenditures for the nine months ended June 30, 2025, totaled **$4.0 billion**, with a full-year FY25 forecast of approximately **$5 billion** Capital Expenditures Reconciliation | (In Millions USD) | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :--- | :--- | :--- | | Cash used for investing activities | $5,681.0 | $4,773.8 | | Adjustments | ($1,678.2) | ($898.1) | | **Capital expenditures (Non-GAAP)** | **$4,002.8** | **$3,875.7** | - The company expects capital expenditures of approximately **$5 billion** for fiscal year 2025[49](index=49&type=chunk)

Core Insights - Air Products reported a GAAP EPS of $3.24 for Q3 FY25, representing a 4% increase year-over-year, and a GAAP operating income of $791 million, up 7% compared to the previous year [3][8] - The company experienced a 1% increase in sales to $3.0 billion, driven by higher energy cost pass-through and pricing, although this was partially offset by a 4% decline in volumes [5][8] - Adjusted EPS decreased by 3% to $3.09, with adjusted operating income remaining flat at $741 million [6][8] Financial Performance - The third quarter results included pre-tax gains of $99 million from asset sales, offset by $25 million in shareholder activism-related costs and a $24 million charge related to project exits [3][6] - Sales in the Americas segment increased by 2% to $1.3 billion, while sales in Asia rose by 3% to $810 million, and Europe saw an 11% increase to $771 million [7][15] - The company revised its full-year adjusted EPS guidance to a range of $11.90 to $12.10, with fourth-quarter guidance set between $3.27 and $3.47 [9][8] Business Segments - The Americas segment's operating income decreased by 4% to $374 million, impacted by higher maintenance costs and lower helium demand [7][15] - Asia's operating income increased by 8% to $217 million, while Europe’s operating income rose by 10% to $225 million, benefiting from favorable pricing and currency effects [15] - Corporate and other sales decreased by 39%, resulting in an operating loss of $83 million, primarily due to the LNG sale [15] Capital Expenditures and Outlook - The company expects capital expenditures of approximately $5 billion for the full fiscal year 2025 [9][8] - Air Products is focusing on cost productivity, pricing strategies, and operational excellence to enhance shareholder value [7][8]

Group 1 - The leader of The Dividend Dog Catcher investing group shares at least one new dividend stock idea weekly, focusing on yield or extraordinary financial circumstances [1] - All investment ideas are archived and accessible after the weekly announcement [1] Group 2 - The article does not provide specific investment recommendations or advice regarding suitability for particular investors [2] - It emphasizes that past performance does not guarantee future results [2]

Core Viewpoint - Wall Street anticipates a year-over-year decline in earnings for Air Products and Chemicals despite higher revenues, with a focus on how actual results compare to estimates impacting stock price [1][2]. Earnings Expectations - The upcoming earnings report is expected to show quarterly earnings of $2.98 per share, reflecting a -6.9% year-over-year change, while revenues are projected at $3.02 billion, up 1.1% from the previous year [3]. - The consensus EPS estimate has been revised 0.03% higher in the last 30 days, indicating a slight bullish sentiment among analysts [4]. Earnings Surprise Prediction - The Zacks Earnings ESP model indicates a positive Earnings ESP of +0.16% for Air Products and Chemicals, suggesting analysts have recently become more optimistic about the company's earnings prospects [12]. - However, the stock holds a Zacks Rank of 4, which complicates the prediction of an earnings beat [12]. Historical Performance - In the last reported quarter, Air Products and Chemicals had an expected EPS of $2.84 but delivered only $2.69, resulting in a surprise of -5.28% [13]. - Over the past four quarters, the company has beaten consensus EPS estimates twice [14]. Industry Context - Another player in the chemical industry, Albemarle, is expected to report a loss of $0.83 per share, with revenues projected at $1.24 billion, down 13.1% year-over-year [18][19]. - Albemarle's consensus EPS estimate has been revised 36% lower recently, but it has a positive Earnings ESP of +21.13%, although it also carries a Zacks Rank of 4 [19][20].