Baird has downgraded Air Products & Chemicals, Inc. APD to Neutral, saying the company’s margin improvement catalysts have substantially played out and the company is more exposed to the sluggish global economic trends.
The downgrade follows Air Products’ first-quarter results, which were below consensus estimates as weaker core results were only partially offset by a lower tax rate. The industrial gases supplier also cut its 2017 guidance on weaker LNG equipment orders, a more cautious outlook for global volumes and increased currency headwinds.
“As APD investors adjust to this new normal, which saw the first guidance reduction during Seifi Ghasemi’s tenure as CEO, we think it makes sense to move to the sidelines as investor sentiment and valuation recalibrate,” analyst David Manthey wrote in a note.
Analyst's Commentary
As such, the analyst noted that the company’s second quarter EPS guidance calls for slightly negative growth at the midpoint, while a meaningful back-half acceleration is needed to hit the midpoint of full-year guidance.
Although Manthey expects excellent execution and capital allocation, the analyst sees higher value for the stock in the low $120s. As such, Manthey slashed his price target to $140 from $146.
Shares of Air Products closed Friday’s trading at $142.01.
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