Air Products beats Q1 expectations, hikes dividend for 44th year
Industrial gases company maintains guidance despite helium market headwinds
Air Products and Chemicals reported stronger-than-expected first-quarter earnings, extending its dividend streak to 44 consecutive years even as the industrial gases giant navigates a challenging helium market.
The Pennsylvania-based company posted adjusted earnings per share of $3.16 for the quarter ending December 31, beating analyst estimates by $0.12. Revenue reached $3.1 billion, modestly exceeding the $3.05 billion consensus forecast and marking a 6% increase from the same period last year. Shares rose 1.2% following the announcement, bringing the company's market capitalization to approximately $57 billion.
The performance was driven by robust growth in the company's core business segments. Adjusted operating income climbed 12% year-over-year to $757 million, while the adjusted operating margin expanded by 140 basis points to 24.4%, according to the company's earnings release. The revenue increase reflected a 3% benefit from energy cost pass-through to customers, a 2% favorable currency impact, and a 1% contribution from higher pricing.
"Our base business performance was strong, offsetting the helium headwinds we experienced during the quarter," the company stated in its earnings materials. "Adjusted operating income increased 12% and adjusted operating margin expanded 140 basis points, demonstrating the resilience of our portfolio."
Air Products, which produces atmospheric gases like oxygen and nitrogen alongside specialty gases including helium, faces ongoing pressure in the helium market. The company reported lower helium demand and flat volumes during the quarter, attributing the weakness to the absence of a significant non-recurring sale that occurred in the prior year's Americas segment. Management anticipates helium market dynamics will weigh on fiscal 2026 profits by approximately 4%, though executives characterized the impact as manageable.
The global helium market remains constrained by supply volatility, with fewer than 15 producers worldwide and the gas typically sourced as a byproduct of natural gas processing. Despite current headwinds, analysts project long-term growth driven by helium's critical applications in semiconductor manufacturing, medical imaging, commercial space launches, and quantum computing. Air Products maintains its position as one of the world's leading helium suppliers, leveraging a diverse source mix and extensive global distribution network.
Investors responded positively to the earnings beat, though the company maintained rather than raised its full-year outlook. Air Products reaffirmed fiscal 2026 adjusted EPS guidance of $12.85 to $13.15, with second-quarter expectations set at $2.95 to $3.10 per share. The guidance aligns with analyst projections, suggesting management remains comfortable with its trajectory despite helium market volatility.
In a separate announcement reinforcing its shareholder-friendly approach, Air Products' board increased the quarterly dividend to $1.81 per share, marking the 44th consecutive year of dividend increases. The new dividend, a $0.02 increase from the previous quarter, will be paid on May 11 to shareholders of record as of April 1. The company's dividend yield currently stands at approximately 2.8%.
Wall Street analysts maintain a cautiously optimistic outlook on Air Products. The consensus price target among 16 analysts sits at $293.80, suggesting roughly 15% upside from current levels, with individual targets ranging from $250 to $375. Out of 30 analysts covering the stock, 12 recommend "Buy," 11 suggest "Hold," and none advise selling. Citigroup and Bank of America Securities both rate the shares "Neutral," with price targets of $272 and $275 respectively.
The company's ability to deliver an earnings beat despite helium market challenges underscores the strength of its diversified business model. Air Products serves customers across refining, chemicals, metals manufacturing, electronics, energy production, healthcare, and food processing industries, providing insulation against volatility in any single end market.
Looking ahead, investors will focus on helium market stabilization and the company's progress in growing its hydrogen energy business. Air Products has positioned itself as a key player in the emerging clean hydrogen economy, though that segment remains in early stages of development relative to its established industrial gases operations.
For now, the Q1 results and continued dividend growth provide evidence of execution amid a transitional period for the helium market. With forward price-to-earnings multiple of 18.5 times expected earnings, investors are paying a premium for stability and shareholder returns that have characterized the company through multiple economic cycles.