Air Products and Chemicals rises with upgrade at BofA

Air Products and Chemicals (NYSE:APD) rose as much as 5.3% on Thursday after analysts at Bank of America Securities upgraded the company’s shares to Buy from a previous investment rating of Neutral. They said the provider of industrial gases has an attractive valuation, a stable business and significant growth potential from clean-energy projects.

“While APD’s valuation started to drift a year ago, the 16% plunge in the shares in the last two weeks appears to be based largely on concerns that APD has prioritized clean energy growth projects with less focus on the base business,” Steve Byrne, analyst at BofA, said in a February 15 report.

Air Products (APD), which supplies gases such as oxygen, nitrogen, helium, argon, and hydrogen, is a partner in a project to produce what’s known as green hydrogen in Neom, a massive urban area planned by Saudi Arabia in its Tabuk region next to the Red Sea. Among its other clean energy projects, Air Products (APD) also is investing in the Louisiana Clean Energy Complex to produce low-carbon hydrogen.

"Our return on invested capital estimates for these projects assumes pricing for these products owing to a lack of current markets," BofA said.

Air Products (APD) last week cut its profit forecast for the year and reported disappointing results for its fiscal first quarter. Its shares sold off and hit a four-year low.

“A key driver of the fiscal first-quarter earnings miss was challenges in APD’s helium business (less than 10% of sales) from less demand and Russian exports, but we expect some recovery,” BofA’s report said. “APD’s volumes have been robust in all three regions [Americas, EMEA, Asia] in the last several quarters.”