Air Products Posts Solid Q1 on Pricing Power and Cost Discipline, Charts Cautious Path Amid Macro Headwinds
Air Products and Chemicals (NYSE: APD) kicked off its fiscal 2026 with what CEO Eduardo Menezes termed a "solid start," delivering earnings that surpassed the high end of its guidance. The industrial gases giant reported a 10% year-over-year increase in adjusted earnings per share to $3.16, bolstered by disciplined pricing actions and operational efficiency across its core business lines.
"Our focus on the fundamentals is yielding results," Menezes stated on the earnings call, marking his first full year at the helm. He detailed a year-long effort to sharpen the company's focus, including project rationalization and portfolio optimization, which helped lift adjusted operating margins to 24.4%. Despite acknowledging a "sluggish" global economic climate, the CEO pointed to resilience in key sectors like aerospace, electronics, and refining, citing a recent NASA liquid hydrogen supply contract as a strategic win.
CFO Melissa Schaeffer provided color on the quarter's mixed volume performance. Overall sales volumes were flat, as growth in on-site gas supply was offset by a decline in helium. The prior-year quarter had benefited from a one-time, large helium sale in the Americas, creating a tough comparison. "Pricing strength in our non-helium merchant business, particularly in the Americas and Europe, was a key driver," Schaeffer noted, adding that this helped overcome a 50-basis-point drag from higher energy pass-through costs.
Helium remains a notable pressure point. Management confirmed it expects helium to be an approximate 4% headwind to full-year EPS, with Asia feeling the most significant impact from both volume and price softness. Looking ahead, Menezes outlined three priorities for the year: unlocking earnings growth, optimizing its slate of large projects, and maintaining strict capital discipline.
A significant portion of the call was devoted to Air Products' ambitious clean energy project portfolio. The company is in advanced negotiations with fertilizer giant Yara International on two major low-emission ammonia ventures—one in Saudi Arabia and another in Louisiana, USA. For the U.S. project, Menezes set a "high bar," emphasizing the need for a firm partner on carbon capture and sequestration, locked-in capital costs, and returns "significantly higher" than traditional hurdles before giving a final investment decision. The potential benefit of U.S. 45Q tax credits was also highlighted as a future earnings catalyst.
On capital allocation, the company reaffirmed its plan to reduce capital expenditures by about $1 billion this fiscal year, maintaining a total CapEx outlook of approximately $4 billion. Shareholder returns continued with a dividend increase, the 44th consecutive annual raise, and nearly $400 million returned to shareholders in the quarter via dividends and buybacks.
Air Products maintained its full-year EPS guidance range of $12.85 to $13.15, citing macroeconomic uncertainty. For Q2, it expects EPS between $2.95 and $3.10, anticipating 10-15% growth despite typical seasonality from the Lunar New holiday and higher planned maintenance activity.
Market Voices: Analyst & Investor Reactions
David Chen, Portfolio Manager at Clearwater Capital: "The margin expansion is impressive and speaks to management's execution on their refocusing plan. The reiterated guidance, amidst known helium challenges, suggests underlying operational strength. The disciplined framework around the Louisiana clean energy project is exactly what investors want to see—growth, but not at any cost."
Rebecca Shaw, Senior Analyst at GreenEdge Research: "While the core business is performing, the 'wait-and-see' posture on Louisiana is telling. The conditions Menezes laid out are stringent. It signals that the era of blank checks for 'green' projects is over, even for industry leaders. The market will reward this capital discipline in the long run."
Michael Torrance, Independent Investor: "Another quarter of excuses on helium and hiding behind 'macro headwinds.' They're touting a 'solid start,' but where's the real volume growth? It feels like they're squeezing pricing and cutting costs to make the numbers while the big, capital-intensive clean energy bets remain a distant, uncertain promise. The stock's premium multiple needs more than just managed decline in a core segment."
Priya Mehta, Chemicals Sector Specialist at Barlow & Co.: "The Yara partnership developments are strategically significant. It de-risks their foray into clean ammonia by aligning with a global distribution powerhouse. The Saudi Arabia marketing agreement could fast-track their green hydrogen ambitions in Europe. This is a smarter path than going it alone."