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Why Should You Add Air Products (APD) to Your Portfolio?

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Air Products and Chemicals, Inc.'s (APD - Free Report) stock looks promising at the moment. The industrial gas giant’s shares have popped roughly 14% over the past three months. It is well-placed for growth on its project investments, productivity actions and new business deals.

We are positive on the company’s prospects and believe that the time is right for you to add the stock to the portfolio as it looks promising and is poised to carry the momentum ahead.

Let's see what makes this Zacks Rank #2 (Buy) stock a compelling investment option at the moment.

Estimates Northbound

Over the past two months, the Zacks Consensus Estimate for Air Products for fiscal 2021 has increased around 0.9%. The consensus estimate for third-quarter fiscal 2021 has also been revised 3% upward over the same time frame. The favorable estimate revisions instill investor confidence in the stock.

Healthy Growth Prospects

The Zacks Consensus Estimate for fiscal 2021 earnings of $9.10 for Air Products suggests a year-over-year growth of 8.6%. Moreover, earnings are expected to register a 18.9% growth in the fiscal third quarter.

Superior Return on Equity (ROE)

Air Products’ ROE of 14.7%, as compared with the industry average of 11.2%, manifests the company’s efficiency in utilizing shareholder’s funds.

Capital Allocation

Air Products remains focused on maximizing returns to shareholders. Air Products’ board, earlier this year, increased its quarterly dividend by 12% to $1.50 per share from $1.34 per share. This marked the 39th straight year of dividend increase. Strong cash flow enables the company to boost shareholders’ value by increasing dividends and capital deployment.

Growth Drivers in Place

Air Products should benefit from its investments in high-return industrial gas projects and project wins. It remains committed to its gasification strategy and is executing its growth projects. 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 95% of the capacity.

Notably, Air Products expects to complete the $12-billion Jazan gasification project in Saudi Arabia this fiscal year. The company, in May 2020, also 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.

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.

Moreover, Air Products is boosting 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. Air Products also has also been benefiting from higher pricing.

 

 

Stocks to Consider

Other top-ranked stocks worth considering in the basic materials space include Dow Inc. (DOW - Free Report) , Cabot Corporation (CBT - Free Report) and Impala Platinum Holdings Limited (IMPUY - Free Report) .

Dow has a projected earnings growth rate of roughly 274.7% for the current year. The company’s shares have surged 53% 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.

Cabot has an expected earnings growth rate of around 126% for the current fiscal. The company’s shares have shot up 51% in the past year. It currently carries a Zacks Rank #2.

Impala Platinum has an expected earnings growth rate of 225.2% for the current fiscal. The company’s shares have surged around 138% in the past year. It currently carries a Zacks Rank #2.

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