APD Stock Study (10-24-25)

Posted by Mark on January 16, 2025 at 07:04 | Last modified: October 25, 2025 10:01

I recently did a stock study on Air Products and Chemicals Inc. (APD, $254.93). Previous studies are here and here.

M* writes:

     > Since its founding in 1940, Air Products has become one of the
     > leading industrial gas suppliers globally, with operations in
     > 50 countries and 19,000 employees. The company is the largest
     > supplier of hydrogen and helium in the world. It has a unique
     > portfolio serving customers in a number of industries, including
     > chemicals, energy, healthcare, metals, and electronics.

Over the last decade, this large-size company has grown sales and earnings at annualized rates of 4.0% and 10.7%, respectively. Lines are somewhat up and parallel. Sales has a long flat time from ’15-’21 followed by further YOY dips in ’23 and ’24. EPS declines YOY in ’17 (perhaps TCJA). 5- (10-) year EPS R^2 is 0.75 (0.81) and Value Line (VL) gives an Earnings Predictability score of 100.

Over the last decade, PTPM leads peer and industry averages while trending higher from 17.5% (’15) to 39.8% (’24) with a last-5-year mean of 27.2%. ROE slightly lags peer and industry averages despite increasing from 16.7% (’15) to 25.4% (’24) with a last-5-year mean of 17.9%. Debt-to-Capital is less than peer and industry averages while ranging from 23.1% in ’19 to 46.8% in ’16 and ’24 with a last-5-year mean of 41.5%.

Quick Ratio is 1.07 and Interest Coverage is 10.9 per M* who gives a Capital Allocation rating of “Standard,” assigns “Wide” for Economic Moat, and gives a Financial Health grade of B (per BI website). VL gives an A+ for Financial Strength.

With regard to sales growth:

• YF projects YOY 0.7% contraction and 4.6% growth for ’25 and ’26, respectively (based on 22 analysts).
• Zacks projects YOY 0.1% contraction and 4.8% growth for ’25 and ’26, respectively (5 analysts).
• VL projects 2.9% annualized growth from ’24-’29.
• CFRA projects 0.2% YOY contraction and 2.9% growth per year for ’25 and ’24-’26.
• M* gives a 2-year annualized ACE of 2.5% and projects 9.5% per year for next 5 years in analyst note.

My 1.0% forecast is near bottom of the range.

With regard to EPS growth:

• MarketWatch projects 2.3% and 4.3% per year for ’24-’26 and ’24-’27, respectively (based on 27 analysts).
• Nasdaq.com projects 7.3% YOY and per year for ’26 and ’25-’27, respectively (7, 7, and 5 analysts for ’25, ’26, and ’27).
• Seeking Alpha projects 4-year annualized growth of 7.2%.
• Finviz projects 5-year annualized growth of 4.0% (1).
• LSEG gives LTG estimate of 3.7%.
• YF projects YOY 3.5% contraction and 7.6% growth for ’25 and ’26, respectively (23).
• Zacks projects YOY 3.3% contraction and 7.3% growth for ’25 and ’26 (7) and 5-year growth of 3.7%/year.
• VL projects 4.5% annualized growth from ’24-’29.
• CFRA projects 2.7% contraction YOY and 2.9% growth/year for ’25 and ’24-’26 and 3-year growth of 8.0%/year.
• M* projects long-term annualized growth of 3.1%.

My initial forecast of 2.0% is below the range of seven long-term estimates (mean 4.5%), but I am lowering further to zero. One option for initial value is trendline $13.13/share. A second option is to use ’24 EPS of $17.24/share; being up 67.4% YOY, this seems extremely high. Google AI explains: “a nonrecurring gain from the sale of its liquefied natural gas (LNG) business boosted Air Products and Chemicals’ (APD) fiscal year 2024 GAAP earnings per share (EPS) by $5.38.” Also explained is why CFRA shows normalized EPS of $12.43 (puzzling that VL does not mention the nonrecurring gain in footnotes). The third option is 2025 Q3 EPS of $7.05 (annualized): extremely low. Of the three options, trendline is most reasonable but still high. I am compensating for that by decreasing the 2.0% forecast.

My Forecast High P/E is 24.0. Over the last 10 years, high P/E ranges from 17.5 in ’24 to 36.3 in ’20 with a last-5-year mean of 30.6 and a last-5-year-mean average P/E of 25.5. I am near bottom of the range (greater than ’24 and equal to 21.0 in ’16).

My Forecast Low P/E is 15.0. Over the last 10 years, low P/E ranges from 12.3 in ’24 to 26.9 in ’21 with a last-5-year mean of 20.4. I am forecasting near the bottom of the range (only ’24 is less).

My Low Stock Price Forecast (LSPF) of $197.00 is default based on initial [trendline] value. This is 22.7% less than the previous closing price and 19.2% less than the 52-week low.

Over the last decade, Payout Ratio (PR) ranges from 41.0% in ’24 to 71.9% in ’17 with a last-5-year mean of 59.1%. I am forecasting bottom of the range at 41.0%. Per M*, dividend has grown 43 years in a row.

These inputs land APD in the HOLD zone with a U/D ratio of 0.4. Total Annualized Return (TAR) is 3.5%.

PAR (using Forecast Average—not High—P/E) of 0.8% is much less than the current risk-free rate (T-bills). If a healthy margin of safety (MOS) anchors this study, then I can proceed based on TAR but even that would be too low.

To assess MOS, I start by comparing my inputs with those of Member Sentiment (MS). Based on 27 studies (my study and 9 other outliers excluded) over the past 90 days, averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, Forecast Low P/E, and PR are 5.0%, 6.1%, 28.4, 19.7, and 59.1%, respectively. I am lower across the board. VL’s projected average annual P/E of 28.0 is greater than MS (24.1) and much greater than mine (19.5).

MS high / low EPS are $16.01 / $7.05 versus my $13.13 / $13.13 (per share). My high EPS is lower due to a zero growth rate. VL is in the middle at $15.00.

MS LSPF of $192.80 implies a Forecast Low P/E of 27.3: greater than the above-stated 19.7. MS LSPF is 38.8% greater than the default $7.05/share * 19.7 = $138.89 resulting in more aggressive zoning. MS LSPF is 2.1% greater than mine, however.

I think MOS is solid in this study because my [adjusted] inputs are near or below analyst/MS/historical estimates/ranges. TAR is much lower than MS 12.7%.

With regard to valuation, PEG is 2.4 and 2.3 per M* and Zacks, respectively: both overvalued. Relative Value [(current P/E) / 5-year-mean average P/E] is also rich at 1.4.

APD is a BUY under $216. With a forecast high price ~$276, BI TAR criterion is met [275.7 / ((12.87 / 100 ) +1 ) ^ 5] ~ $150.

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