RBC Capital Markets initiated coverage of Air Products and Chemicals (NYSE: APD ) and Linde (NYSE: LIN ) with Outperform ratings, saying both industrial gases companies are well positioned to deliver steady earnings growth and improved returns.
Air Products was described as a turnaround story. RBC said a recent decline in the shares presents a buying opportunity.
With new leadership, the company is distancing itself from riskier growth projects and refocusing on its traditional industrial gases activities.
The bank sees potential for a recovery in the shares after a decline of around 10% since March and set a price target of 355 dollars.
It expects most of the gains to come from better operating performance and investor confidence in the company's simplified strategy.
Air Products plans to reduce capital spending by $2.5 billion by 2030, scale back underperforming initiatives and cut nearly 4,500 jobs by 2028.
Linde is sticking to its proven formula of steady price increases and disciplined project spending.
Despite weaker industrial demand, the company was able to further increase its profit margins and return capital to shareholders through share buybacks and dividends.
RBC set a price target of USD 576 for Linde, citing the company's track record of stable growth and a number of major projects that are expected to contribute positively to earnings in the coming years.
The firm said that both companies offered relative safety at a time of greater uncertainty in industrial markets, with Linde seen as the more stable operator and Air Products offering greater recovery potential.
