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Why You Should Retain Air Products (APD) Stock in Your Portfolio

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Air Products and Chemicals, Inc. (APD - Free Report) is expected to benefit from its project investments, productivity actions and new business deals. However, the softness in China and Europe is a concern.

The company’s shares have lost 3.7% over a year, compared with an 8% decline of its industry.

 

Zacks Investment Research
Image Source: Zacks Investment Research


Let’s find out why this Zacks Rank #3 (Hold) stock is worth retaining at the moment.

APD Gains on High-return Projects and Productivity Actions

Air Products is well-placed to gain from its investments in high-return industrial gas projects and productivity measures. It remains focused on 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 2024-2033) $30.8 billion in high-return investments aimed at creating significant shareholder value.

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 focused on improving pricing amid an inflationary environment.

The company also remains committed to maximize returns to shareholders leveraging strong balance sheet and cash flows. Air Products’ board, in January 2024, increased its quarterly dividend to $1.77 per share. This marked the 42nd straight year of dividend increase. The company paid roughly $1.5 billion in dividends to shareholders in 2023. It expects to return roughly $1.6 billion to shareholders through dividends in 2024.

Weakness in China & Europe a Concern

The slowdown in China and Europe may affect the company’s business in these regions. The sluggish China economy is impacting volumes in the Industrial Gases - Asia segment. A slower economic recovery in China and the softness in electronics may continue to affect the segment’s volumes. Air Products is also seeing weak demand for merchant products in Europe. Its volumes in Europe rose modestly year-over-year in the fiscal third quarter as the contribution of the new assets in Uzbekistan offset weaker merchant volumes. The lack of growth in industrial output in Europe is a concern for the near term.

Stocks to Consider

Some better-ranked stocks in the Basic Materials space are Newmont Corporation (NEM - Free Report) , Franco-Nevada Corporation (FNV - Free Report) and Agnico Eagle Mines Limited (AEM - Free Report) . Newmont and Franco-Nevada sport a Zacks Rank #1 (Strong Buy), while Agnico Eagle carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Newmont’s current-year earnings is pegged at $2.82, indicating a rise of 75.2% from year-ago levels. The consensus estimate for NEM’s earnings has increased 16% in the past 60 days. The stock has gained around 28% in the past year. 

The consensus estimate for Franco-Nevada’s current-year earnings has increased by 3% in the past 60 days. FNV beat the consensus estimate in three of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 6%, on average.

The Zacks Consensus Estimate for Agnico Eagle’s current-year earnings is pegged at $3.65, indicating a year-over-year rise of 63.7%. AEM’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average earnings surprise being 15.7%. The company’s shares have rallied roughly 68% in the past year.

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