Air Products and Chemicals, Inc.‘s APD stock looks promising at the moment. The company’s shares have gained roughly 10.7% over the past three months, outperforming its industry’s rise of 8.9% over the same time frame. It is well-placed for growth on its project investments, productivity actions and new business deals.
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Air Products currently carries a Zacks Rank #2 (Buy) and a VGM Score of B. Our research shows that stocks with a VGM Score of A or B, combined with a Zacks Rank #1 (Strong Buy) or 2, offer the best investment opportunities for investors.
Let’s see what makes this industrial gas giant a compelling investment option at the moment.
Healthy Growth Prospects
The Zacks Consensus Estimate for fiscal 2022 earnings of $10.38 for Air Products suggests a year-over-year growth of 15.1%. Earnings are also expected to register a 18.4% growth in first-quarter fiscal 2022. The company also has an expected long-term earnings per share growth rate of 11.9%.
Air Products, in its last earnings call, said that it expects adjusted earnings per share of $10.20-$10.40 for fiscal 2022, up 13-15% over prior-year adjusted earnings per share. For the first quarter of fiscal 2022, it sees adjusted earnings per share of $2.45-$2.55, up 16-20% year over year.
Air Products remains focused on maximizing returns to shareholders. The company generated around $2.7 billion of distributable cash flow during fiscal 2021. This distributable cash flow enabled it to pay roughly $1.3 billion or more than 45% as dividends to shareholders during the fiscal. Air Products’ board, in fiscal 2021, also increased its quarterly dividend by 12% to $1.50 per share from $1.34 per share. This marked the 39th straight year of dividend increase. Strong cash flow enables the company to boost shareholders’ value by increasing dividends and capital deployment.
Project Investments, Productivity to Drive Results
Air Products should benefit from its investments in high-return industrial gas projects and project wins. It remains committed to its gasification strategy and is executing its growth projects. The company has a total available capacity to deploy (over fiscal 2018-2027) around $33.5 billion in high-return investments aimed at creating significant shareholder value. It has already spent or committed roughly 67% of the capacity.
The company, in October 2021, completed the asset acquisition and project financing transactions of the $12-billion Jazan project in in Saudi Arabia. It expects to close the Phase Two of this project in 2023. The company, in May 2020, also inked a deal to invest roughly $2 billion for a world-scale coal-to-methanol manufacturing facility in Indonesia. The company will develop, own and operate the air separation, gasification, syngas clean-up, utilities and methanol production assets to manufacture methanol. The investment is in sync with Air Products’ long-term plan to deploy capital into high-return industrial gas projects.
Last year, it also announced the $4.5 billion world-class clean energy complex in Louisiana. The project, the company’s largest-ever investment, is expected to produce more than 750 million standard cubic feet per day of blue hydrogen for local and global markets by 2026.
Air Products, in April 2020, also completed the buyout of five steam methane reformer hydrogen production plants for $530 million from PBF Energy. The PBF deal is expected to be accretive to the company’s bottom line.
The company is also boosting productivity to improve its cost structure. It is seeing the positive impacts of its productivity actions. Benefits from additional productivity and cost improvement programs are likely to support its margins moving ahead. Air Products also has also been benefiting from higher pricing.
Stocks to Consider
Other top-ranked stocks worth considering in the basic materials space include Commercial Metals Company CMC, Albemarle Corporation ALB and AdvanSix Inc. ASIX.
Commercial Metals, sporting a Zacks Rank #1, has a projected earnings growth rate of 10.5% for the current fiscal year. The Zacks Consensus Estimate for CMC’s current fiscal year earnings has been revised 6.6% upward over the past 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.
Commercial Metals beat the Zacks Consensus Estimate for earnings in three of the last four quarters while missed once. It has a trailing four-quarter earnings surprise of roughly 7.4%, on average. CMC has rallied around 64% in a year.
Albemarle, carrying a Zacks Rank #2, has an expected earnings growth rate of 49.8% for the current year. ALB’s consensus estimate for the current year has been revised 4% upward over the past 60 days.
Albemarle beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 22.1%. ALB shares have popped around 33% in a year.
AdvanSix, carrying a Zacks Rank #2, has an expected earnings growth rate of 3.9% for the current year. The Zacks Consensus Estimate for ASIX’s earnings for the current year has been revised 1.6% upward in the past 60 days.
AdvanSix beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 46.9%. ASIX has rallied around 106% in a year.
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Air Products and Chemicals, Inc. (APD): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.