Air Products Stock Tumbles on Weak Profit Forecast

Air Products (APD) stock took a tumble on Thursday after the company forecast second-quarter profit below Wall Street's expectations. The industrial gases manufacturer cited challenging market conditions in key regions such as China and the impact of tariffs on its projects as reasons for the weak outlook. Shares of Air Products fell by 1% following the announcement.



The company, which recently emerged from an expensive boardroom battle, told analysts on a post-earnings call that China's market remains challenging, with no material improvement in sight. Air Products also expects tariffs to impact its projects, sending shares down 1%. The ongoing trade war between the United States and China, initiated by President Donald Trump's 10% tariff on Chinese imports, has led to retaliatory measures from China, including targeted tariffs on U.S. goods and potential sanctions on various companies.



Air Products recorded a charge of $29.9 million in the first quarter due to costs related to shareholder activism. The company also mentioned that higher costs related to inflation and incentive compensation partially offset the benefits of higher pricing. These factors contributed to the company's lower-than-expected profit forecast.

Morningstar analyst Krzysztof Smalec expects the new management to focus on instilling a more disciplined risk-management framework and improving margins by eliminating costs associated with non-core activities. Despite the recent setback, Air Products remains well-positioned to capitalize on opportunities in the industrial gas market, given its strong track record of delivering consistent growth and wide economic moat.



In conclusion, Air Products' weak profit forecast and subsequent stock decline can be attributed to challenging market conditions in China, the impact of tariffs on projects, and higher costs related to shareholder activism and inflation. While these factors may pose short-term challenges, the company's long-term growth prospects remain intact, and it is well-positioned to capitalize on opportunities in the industrial gas market. Investors should monitor the situation closely and consider the potential impact of tariffs and trade tensions on Air Products' operations in key markets like China and the United States.