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Air Products' (APD) Shares Up 23% in 3 Months: Here's Why

Zacks Equity Research

Shares of Air Products and Chemicals, Inc. APD have popped around 23% over the past three months. The company has also significantly outperformed its industry’s decline of roughly 4% over the same time frame.

Air Products, a Zacks Rank #2 (Buy) stock, has a market cap of roughly $48.8 billion and average volume of shares traded in the last three months was around 1,151.2K. The company has an expected long-term earnings per share growth rate of 11.8%, above the industry average of 11%.


 

Let’s take a look into the factors that are driving this industrial gases giant.

What's Working in APD’s Favor?

Forecast-topping earnings performance in the fiscal second quarter, upbeat outlook and healthy growth prospects have contributed to the gains in Air Products’ shares. The company is poised for growth in fiscal 2019 on the back of its project investments, new business deals and acquisitions.

Air Products logged profit from continuing operations of $421.3 million or $1.90 per share in second-quarter fiscal 2019, higher than $416.4 million or $1.89 in the year-ago quarter. Adjusted earnings per share in the quarter were $1.92, up 12% from the year-ago quarter’s earnings of $1.71. It topped the Zacks Consensus Estimate of $1.88.

Air Products, in April, raised its adjusted earnings per share guidance for fiscal 2019 to the range of $8.15-$8.30 from the previous expectation of $8.05-$8.30. This suggests 10% rise year over year at the midpoint.

The company also expects adjusted earnings for third-quarter fiscal 2019 in the band of $2.10-$2.15 per share, which indicates 8-10% rise year over year.

The Zacks Consensus Estimate for earnings for fiscal 2019 of $8.22 for Air Products reflects an expected year-over-year growth of 10.3%. Moreover, earnings are expected to register a 13.7% growth in fiscal 2020.

Air Products’ strategic investments in high-return projects, productivity actions and contributions of acquisitions should drive its fiscal 2019 results. The Lu'An syngas project in China, which is now fully onstream, contributed to the results in the company’s Industrial Gases – Asia segment in the fiscal second quarter. The company expects the Lu'An project to contribute more than 25 cents per share to its earnings in fiscal 2019.

Air Products has a total available capacity to deploy (over fiscal 2018-2022) roughly $16 billion in high-return investments, aimed at creating significant shareholder value. The company has already spent or committed more than half of this capacity.

Earlier this year, the company also completed the buyout of ACP Europe SA, which is the largest independent carbon dioxide business in Continental Europe. The buyout enables the company to serve existing customers better and tap new industrial gas growth opportunities. Air Products noted that the acquisition provides it a strong platform to pursue further industrial gas growth in Europe and deliver value to customers.

Air Products also remains committed to boost productivity to improve its cost structure. The company is seeing positive impact of its productivity actions and expects to benefit from additional productivity and cost improvement programs in fiscal 2019.

Air Products and Chemicals, Inc. Price and Consensus

 

Air Products and Chemicals, Inc. Price and Consensus

Air Products and Chemicals, Inc. price-consensus-chart | Air Products and Chemicals, Inc. Quote

Stocks Worth a Look

Stocks worth considering in the basic materials space include Materion Corporation MTRN, Israel Chemicals Ltd. ICL and Innospec Inc. IOSP.

Materion has an expected earnings growth rate of 27.3% for the current year and carries a Zacks Rank #1 (Strong Buy). The company’s shares have gained around 12% over the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.

Israel Chemicals has an expected earnings growth rate of 13.5% for the current fiscal year and carries a Zacks Rank #1. Its shares have gained around 9% in the past year.

Innospec has an expected earnings growth rate of 6.6% for the current year and carries a Zacks Rank #2. Its shares are up roughly 5% in the past year.

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