Air Products and Chemicals, Inc.’s APD shares have popped 52.7% over the past six months against the industry’s rise of 49.3%.
The industrial gases giant has a market cap of roughly $65.4 billion and average volume of shares traded in the last three months is around 1,069.6K. Air Products has expected long-term earnings per share growth of 8.8%, above the industry average of 7%.
Let’s take a look into the factors that are driving this Zacks Rank #3 (Hold) company.
What’s Aiding APD?
Air Products is benefiting from its investments in high-return projects, project wins and productivity actions. It is well-placed for growth on the back of its project investments. The company remains committed to execute its growth projects including the $7-billion carbon-free hydrogen project in Saudi Arabia and the $2-billion coal-to-methanol project in Indonesia.
Air Products, in May 2020, inked a deal to invest roughly $2 billion for a world-scale coal-to-methanol manufacturing facility in East Kalimantan, 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.
The company, in July 2020, also entered into a deal with ACWA Power and NEOM for a $5-billion green hydrogen-based ammonia manufacturing facility powered by renewable energy. Notably, the project will produce 650 tons of hydrogen per day by electrolysis, using Thyssenkrupp technology, nitrogen by air separation using Air Products’ technology, and 1.2 million tons per year of green ammonia using Haldor Topsoe technology. Air Products will invest an additional $2 billion to develop the infrastructures for converting ammonia to carbon-free hydrogen.
Moreover, the company’s project in the United States, which is worth $500 million, showcases its core strengths and capabilities for supplying nitrogen from an air separation unit and hydrogen from a steam methane reformer. The project will likely boost the size and supply capacity of Air Products' extensive hydrogen pipeline system in the Gulf Coast.
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 in fiscal 2020. Air Products also expects to complete the $12-billion Jazan gasification project in Saudi Arabia this year.
The company has a total available capacity to deploy (over fiscal 2018-2022) around $17.6 billion in high-return investments aimed at creating significant shareholder value. It has already spent or committed roughly 90% of the capacity.
Moreover, Air Products is boosting productivity to improve its cost structure. It is seeing the positive impacts of its productivity actions, and is expected to benefit from additional productivity and cost-improvement programs in fiscal 2020.
The company also remains committed to maximize returns to shareholders. Its board, earlier this year, increased its quarterly dividend by more than 15% to $1.34 per share from $1.16 per share, marking the largest dividend hike in the company’s history. This also marked the 38th straight year of dividend increase. Strong cash flow enables the company to boost shareholders’ value by increasing dividends and capital deployment.
Air Products and Chemicals, Inc. Price and Consensus
Air Products and Chemicals, Inc. price-consensus-chart | Air Products and Chemicals, Inc. Quote
Stocks to Consider
Better-ranked stocks worth considering in the basic materials space include Barrick Gold Corporation GOLD, Yamana Gold Inc. AUY and AngloGold Ashanti Limited AU.
Barrick Gold has a projected earnings growth rate of 86.3% for the current year. The company’s shares have rallied around 58% in a year. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Yamana Gold has an expected earnings growth rate of 84.6% for the current year. The company’s shares have surged around 71% in the past year. It currently carries a Zacks Rank #2 (Buy).
AngloGold Ashanti has a projected earnings growth rate of 124.2% for the current year. The company’s shares have gained roughly 28% in a year. It currently carries a Zacks Rank #2.
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