Analyst Note| Krzysztof Smalec, CFA |
Narrow-moat-rated Air Products announced that it will invest $4.5 billion in a blue hydrogen complex in Louisiana, expected onstream in 2026. Based on Air Products’ return target of at least $0.10 of operating income per dollar of investment, we estimate that the project could contribute over $1.60 to the firm’s EPS when it becomes operational. We’ve raised our fair value estimate for Air Products to $330 from $316, which reflects the Louisiana project, a higher EPS contribution from Jazan (as the firm recently announced the closing of the acquisition), and time value of money. We see Air Products as modestly undervalued, with the stock trading roughly 13% below our updated fair value estimate.