Air Products (APD) Gains on Project Investments, Productivity
Air Products and Chemicals, Inc. APD is expected to benefit from its investments in high-return industrial gas projects and productivity measures. Higher volumes and pricing should also support its results amid currency headwinds.
The company’s shares are up 22.9% over a year, compared with a 10% rise recorded by its industry.
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Air Products, a Zacks Rank #3 (Hold) stock, is gaining from higher pricing and volumes as witnessed in the last reported quarter. Its top line in second-quarter fiscal 2023 was driven primarily by higher pricing across the regions and increased volumes.
The company, in its fiscal second quarter call, said that it expects full-year fiscal 2023 adjusted earnings per share of $11.30-$11.50, indicating a 10-12% year-over-year growth. For the third quarter of fiscal 2023, the company expects adjusted earnings per share in the range of $2.85-$2.95, suggesting a rise of 10-14% from the year-ago quarter.
Air Products is benefiting from investments in high-return projects, new business deals, acquisitions and productivity initiatives. It remains committed to its gasification strategy and is executing its growth projects. These projects are expected to be accretive to earnings and cash flows. APD is realizing the benefits of the completion of the second phase of the Jazan project in Saudi Arabia.
The company has a total available capacity to deploy (over fiscal 2018-2027) $34.8 billion in high-return investments aimed at creating significant shareholder value. It has already spent or committed 70% of the capacity.
Air Products is also driving 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.
The company also remains committed to maximize returns to shareholders leveraging strong balance sheet and cash flows. APD, earlier this year, increased its quarterly dividend by 8% to $1.75 per share from $1.62 per share. This marked the 41st straight year of dividend increase. The company expects to pay more than $1.5 billion to shareholders in 2023.
However, Air Products is exposed to headwinds from unfavorable currency translation. It witnessed negative currency impacts on its sales and margins in the last reported quarter. Currency translation, stemming from a stronger U.S. dollar, reduced its sales and EBITDA by 4% in the fiscal second quarter. The company also saw currency headwinds in its Asia segment, which reduced its EBITDA by 7% in the quarter. It is likely to face continued currency headwinds in the fiscal third quarter.
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 L.B. Foster Company FSTR, Gold Fields Limited GFI, and Linde plc LIN.
L.B. Foster currently carries a Zacks Rank #1 (Strong Buy). The Zacks Consensus Estimate for FSTR's current-year earnings has been stable over the past 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.
L.B. Foster’s earnings beat the Zacks Consensus Estimate in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 140.5%, on average. FSTR has gained around 10% in a year.
Gold Fields currently carries a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for GFI’s current-year earnings has been revised 4% upward in the past 60 days.
The consensus estimate for current-year earnings for GFI is currently pegged at $1.05, reflecting an expected year-over-year growth of 8.3%. Gold Fields’ shares have popped roughly 54% in the past year.
Linde currently carries a Zacks Rank #2. The Zacks Consensus Estimate for LIN’s current-year earnings has been revised 4.4% upward in the past 60 days.
Linde beat Zacks Consensus Estimate in each of the last four quarters. It delivered a trailing four-quarter earnings surprise of 6.9% on average. LIN’s shares have gained roughly 29% in the past year.
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