Air Products & Chemicals Inc. (APD) just demonstrated something increasingly rare in industrial manufacturing: the ability to grow earnings when demand isn't exactly cooperating. The industrial gases company reported first-quarter fiscal 2026 results on Friday that beat expectations, sending shares higher in premarket trading.
Revenue came in at $3.103 billion, up 6% from $2.932 billion a year earlier and comfortably ahead of the $3.051 billion Wall Street was expecting. Adjusted EPS hit $3.16, marking a 10% year-over-year increase that exceeded both company guidance and the $3.04 analyst estimate.
Here's what makes this interesting: volumes were completely flat. Higher on-site volumes got canceled out by lower helium demand and a tough comparison to last year's significant helium sale in the Americas. So how did revenue grow? The old-fashioned way—pricing power, energy cost pass-through, and favorable currency movements. When you can raise prices while volumes stay flat, that's a pretty good sign you're not a commodity business.
The margin story looks even better. GAAP operating income jumped 14% to $735 million, pushing operating margin up 170 basis points to 23.7%. That happened despite a roughly 50-basis-point drag from higher energy cost pass-through in the Americas segment. On an adjusted basis, operating income climbed 12% to $757 million, with operating margin expanding 140 basis points to 24.4%.
CEO Eduardo Menezes highlighted the base business strength: "We had strong results from the base business, with a 10% increase in adjusted EPS compared to the prior year period, and also posted a 12% improvement in adjusted operating income despite helium headwinds in the quarter. This is a solid start as the Air Products team continues to focus on unlocking earnings growth, optimizing large projects, and maintaining capital discipline."
Regional Performance Shows Diverging Trends
The Americas delivered $1.3 billion in sales, up 4% despite a 4% volume decline. Energy cost pass-through added 6%, pricing contributed another 2%, but volumes worked against them. Operating income rose 4% to $404 million, though operating margin stayed flat at 30.1%.
Asia posted $832 million in sales, up 2%, but the real story was margin expansion. Operating income increased 7% to $232 million, and operating margin improved 140 basis points to 27.9%. Credit productivity improvements and reduced depreciation on gasification assets now classified as held for sale.
Europe turned in the strongest performance with sales climbing 12% to $782 million. Operating income surged 20% to $224 million, and operating margin expanded a hefty 190 basis points to 28.6%. Meanwhile, Middle East and India equity affiliates' income held steady at $85 million.
Balance Sheet and Cash Generation
Air Products generated $900.7 million in operating cash flow during the quarter and ended with $1.026 billion in cash and cash items. Long-term debt stood at $17.115 billion, with $169.8 million in current portion and $66.7 million in short-term borrowings.
The company took $28.3 million in business and asset action charges (or $24.6 million after tax, equating to $0.11 per share) related to project exits announced in fiscal 2025.
Looking Ahead
Management reaffirmed full-year fiscal 2026 adjusted EPS guidance of $12.85 to $13.15, right in line with the $12.96 analyst consensus. Capital expenditures are still expected to run around $4.0 billion for the year.
For the second quarter, the company expects adjusted EPS between $2.95 and $3.10, compared to the $3.02 Street estimate.
Recent developments include advanced negotiations with Yara International on low-emission ammonia projects, a quarterly dividend increase to $1.81 per share, and NASA supply contracts worth more than $140 million.
APD Price Action: Shares rose 0.67% to $257.74 during premarket trading on Friday.
