There Are Multiple Ways To Value Air Products – Not All Of Them Good!

The strategy at Air Products may work, but for now it is deviating from the pathway of a traditional industrial gas model, as it did in the early part of the last decade, and valuation is taking a hit – can Air Products be Linde?
With its large coal gasification-based investments of the last decade, Air Products began to resemble a utility – a sector with a lower multiple – now it runs the risk of becoming a commodity chemical company – worse.
Air Products may be in the right place at the right time with low carbon ammonia, but unless it can then turn that into long-term take or pay contracts, a commodity multiple could drag down the stock as earnings rise.
Locking in less attractive take-or-pay contracts today for the ammonia at NEOM and in Louisiana may improve investor confidence even if the project economics suffer – canceling the Louisiana project may also work!
Otherwise, more on earnings season and what we think is misplaced optimism in Europe, why we still like Ag, copper, and Westlake. We look at power constraints holding back hydrogen and all constraints in transition.

Exhibit 1: Air Products equity trades at a greater discount to Linde today than when the activist arrived in 2013!