Air Products and Chemicals' (APD) share price rally on Friday was likely due to more clarity surrounding the the status of the final investment decision for the Darrow hydrogen and ammonia project, RBC Capital Markets said in a note emailed Monday.

Air Products' management "base case is to cancel Darrow unless it can meet high return thresholds, even with elevated construction costs," the investment firm said.

RBC said that given this stance, it is still bullish on Air Products and its planned $250 million of cost cutting by 2027.

The largest driver for a final investment decision for the Darrow project by the middle of this year is Engineering, Procurement and Construction, or EPC, contract bidding, because Air Products "needs to lock in project costs to ensure sufficient returns," the note said.

Unless Air Products can further cut costs, the company's management may terminate the project, adding that management's "approach to Darrow shows its commitment to predictable, non-speculative core industrial gas," the note said.

RBC reiterated its outperform rating on the company and $325 price target.

Price: 273.90, Change: +1.34, Percent Change: +0.49