- Adjusted EPS Beat - Q3 2025 adjusted EPS of $3.09 exceeded guidance and prior year.
- Cost Savings Progress - Global cost reduction plan on track to generate $185-195 million in annual savings.
- 5-Year Growth Roadmap - Aims for high single-digit adjusted EPS growth and 30% operating margins by 2030.
- Americas Volume Decline - Volumes dropped 6% due to exited projects and lower helium demand.
- Capital Expenditure Plan - $5 billion CapEx expected for the full year, targeting cash neutrality over three years.
Segment Performance
The company's Americas volume declined 6%, mainly due to exited projects and lower helium demand. However, the company saw strong on-site volumes, which were offset by lower helium demand and project exits. This mixed performance highlights the challenges faced by the company in certain markets.
Cost Reduction and Investment Plans
Air Products is working to finalize partnerships for its plan to use third parties at Darrow for ammonia and carbon capture and sequestration by the end of the year and is optimistic about achieving this goal. The company has a $1.5 billion plan to invest in low-risk projects for the core business and is seeing a lot of project activity in small plants and electronics in Asia. This investment plan is expected to drive growth and improve profitability.
Valuation and Outlook
At current prices, Air Products trades at a P/E ratio of 40.47, which may suggest that the market is pricing in high growth expectations. However, with a dividend yield of 2.53% and a free cash flow yield of 1.4%, the stock may still offer some value to income-seeking investors. According to analyst estimates, the company is expected to grow revenues by 4.7% next year, which may support a higher valuation multiple. With an actual EPS of $3.09 relative to estimates of $3, the company's performance appears to be on track.
Helium Market and ROCE
The helium market is experiencing a cycle, with a structural change due to the BLM becoming less of a factor and new sources connected to natural gas processing in LNG plants. Air Products has invested in a helium cabin to manage balance and is seeing others invest, a positive sign for the market. The company's long-term ROCE goal is in the mid- to high-teens, with a current ROCE of 11.1%. Excluding NEOM, ROCE would be up about 500 basis points. The company expects to meet and beat its ROCE forecast over the next five years.