Air Products and Chemicals: A Solid Stock Amid Global Challenges
Air Products and Chemicals, Inc. (APD) is positioned to thrive through its impressive project investments, productivity initiatives, and strategic partnerships, despite some challenges in China and Europe.
The company’s shares have risen 26% over the past year, significantly outperforming the Zacks Chemicals Diversified industry, which has seen a 7.1% increase.
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Let’s explore the reasons behind holding onto APD stock at this moment.
Growth through High-Return Investments and Productivity
Air Products is strategically positioned to gain from high-return investments in industrial gas projects and its focus on productivity improvements. The company is dedicated to its gasification strategy and is actively executing growth projects, which should positively impact earnings and cash flow.
Benefits from the completion of the second phase of the Jazan project in Saudi Arabia are already being realized. Additionally, Air Products’ joint venture (JV) project, aiming to create the world’s largest green hydrogen facility with NEOM and ACWA Power, is progressing well. Approximately 60% of construction is complete, with the facility expected to be operational by the end of 2026.
Moreover, Air Products is making strides in productivity to enhance its cost-efficiency. Positive impacts from its productivity measures are becoming apparent. Continued progress in cost improvement programs is anticipated to support margins in the future. The company remains committed to optimizing pricing to combat inflationary pressures.
Air Products emphasizes returning value to shareholders, supported by a robust balance sheet and strong cash flows. Earlier this year, the board increased the quarterly dividend to $1.77 per share, marking the 42nd consecutive year of dividend increases. For 2024, APD plans to return approximately $1.6 billion to shareholders through dividends.
Concerns: Economic Slowdowns in China and Europe
Despite its strengths, Air Products faces challenges due to a slowdown in China and Europe. The sluggish Chinese economy presents a near-term concern. A slower recovery and diminished demand in electronics could hamper volume growth. Reflecting this uncertainty, APD has issued a cautious forecast for the first quarter of fiscal 2025, acknowledging economic risks in China.
Demand for merchant products in Europe also appears weak. Volumes remained unchanged in the fiscal fourth quarter, as the contributions from new assets in Uzbekistan counterbalanced declines in merchant volumes. This stagnation in industrial output in Europe raises concerns for the near future.
Price Analysis: Air Products and Chemicals, Inc.
Air Products and Chemicals, Inc. price and consensus chart | Air Products and Chemicals, Inc. Quote
Zacks Rank and Notable Alternatives
Currently, APD holds a Zacks Rank #3 (Hold).
In the Basic Materials sector, better-ranked stocks include Methanex Corporation (MEOH), Axalta Coating Systems Ltd. (AXTA), and Ingevity Corporation (NGVT), all carrying a Zacks Rank #2 (Buy). You can find the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Methanex’s current-year earnings has increased by 20.7% over the past 60 days. MEOH has consistently exceeded consensus estimates for the last four quarters, with average surprises nearing 101%. Its shares have risen about 12% in the past year.
The Zacks Consensus Estimate for Axalta Coating’s current-year earnings stands at $2.15, a 36.9% increase from the previous year. Additionally, the estimate has seen a 3.9% rise over the past 60 days, and its stock has surged approximately 26% in the past year.
Ingevity has outperformed consensus estimates in three out of the last four quarters, achieving an average earnings surprise of 95.4%. NGVT’s shares have also gained around 26% over the past year.
Zacks Highlights Potential Growth Stocks
Our team of experts has identified five stocks that have a high chance of gaining +100% or more within the coming months. Among these, the Director of Research, Sheraz Mian, highlights one stock likely to excel.
This leading selection features innovative financial services with a growing customer base of over 50 million and a range of cutting-edge solutions. While past selections have varied in performance, this stock is on a promising path, reminiscent of earlier Zacks recommendations like Nano-X Imaging, which increased by +129.6% within just nine months.
Free: Discover Our Top Stock And 4 Additional Recommendations
Air Products and Chemicals, Inc. (APD) : Free Stock Analysis Report
Methanex Corporation (MEOH) : Free Stock Analysis Report
Axalta Coating Systems Ltd. (AXTA) : Free Stock Analysis Report
Ingevity Corporation (NGVT) : Free Stock Analysis Report
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The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Nasdaq, Inc.
