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Here's Why You Should Hold Onto Air Products (APD) Stock for Now
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Air Products and Chemicals, Inc. (APD - Free Report) is expected to benefit from its investments in high-return industrial gas projects and productivity measures amid headwinds including higher energy costs.
The company’s shares are down 6.8% over a year, compared with an 8.8% decline recorded by its industry.
Let’s find out why this Zacks Rank #3 (Hold) stock is worth retaining at the moment.
Image Source: Zacks Investment Research
What’s Aiding APD?
Air Products is well-placed to gain from its investments in industrial gas projects and project wins. 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. The company has a total available capacity to deploy (over fiscal 2018-2027) around $35 billion in high-return investments aimed at creating significant shareholder value. It has already spent or committed roughly 73% of the capacity.
The company, in October 2021, completed the asset acquisition and project financing transactions of the $12-billion Jazan project in in Saudi Arabia. It expects to close the Phase Two of this project in 2023.
Last year, it also announced the $4.5 billion world-class clean energy complex in Louisiana. The project, the company’s largest-ever investment, is expected to produce more than 750 million standard cubic feet per day of blue hydrogen for local and global markets by 2026.
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. Air Products, in Apr 2022, also purchased Air Liquide's industrial gases business in the United Arab Emirates ("UAE"), including liquid bulk, packaged gases and specialty gases. APD also acquired Air Liquide's majority share in MECD, which owns and operates a liquid CO2 manufacturing site in Bahrain. By purchasing these businesses, Air Products broadened its footprint and regional presence in the UAE and Bahrain.
The company has also been benefiting from higher pricing. Higher merchant demand is also driving its volumes. Moreover, it 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 this year.
A Few Headwinds
Air Products is exposed to challenges from cost inflation. It is witnessing higher power costs in its merchant business. The company is seeing significantly higher energy costs, especially in EMEA due to the considerably high natural gas and electricity costs. It is expected to continue to face headwinds from the power cost inflation moving ahead. As such, higher power costs are likely to weigh on margins over the near term.
The company also faces headwinds from unfavorable currency translation. It witnessed significant currency headwinds in the last reported quarter, especially in Europe. Currency translation, stemming from a stronger U.S. dollar, reduced its sales and EBITDA by 5% in the quarter. In Europe, all major currencies were weaker vis-à-vis the U.S. dollar by double-digits in the quarter. The company sees continued currency headwinds moving ahead.
Air Products and Chemicals, Inc. Price and Consensus
Some better-ranked stocks worth considering in the basic materials space include Daqo New Energy Corp. (DQ - Free Report) , Albemarle Corporation (ALB - Free Report) and Sociedad Quimica y Minera de Chile S.A. (SQM - Free Report) .
Daqo New Energy, currently carrying a Zacks Rank #1 (Strong Buy), has an expected earnings growth rate of 177.5% for the current year. The Zacks Consensus Estimate for DQ's earnings for the current fiscal has been revised 20.8% upward in the past 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.
Daqo New Energy’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters, the average being 10.8%. DQ has gained around 11% over a year.
Albemarle has a projected earnings growth rate of 425.7% for the current year. The consensus estimate for ALB's current-year earnings has been revised 67.9% upward in the past 60 days.
Albemarle’s earnings beat the Zacks Consensus Estimate in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 24.2%, on average. ALB has gained around 6% in a year and currently carries a Zacks Rank #1.
Sociedad has a projected earnings growth rate of 520.5% for the current year. The Zacks Consensus Estimate for SQM’s current-year earnings has been revised 34% upward in the past 60 days.
Sociedad’s earnings beat the Zacks Consensus Estimate in two of the trailing four quarters, the average being 28.2%. SQM has rallied roughly 81% in a year. The company carries a Zacks Rank #2 (Buy).
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Here's Why You Should Hold Onto Air Products (APD) Stock for Now
Air Products and Chemicals, Inc. (APD - Free Report) is expected to benefit from its investments in high-return industrial gas projects and productivity measures amid headwinds including higher energy costs.
The company’s shares are down 6.8% over a year, compared with an 8.8% decline recorded by its industry.
Let’s find out why this Zacks Rank #3 (Hold) stock is worth retaining at the moment.
Image Source: Zacks Investment Research
What’s Aiding APD?
Air Products is well-placed to gain from its investments in industrial gas projects and project wins. 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. The company has a total available capacity to deploy (over fiscal 2018-2027) around $35 billion in high-return investments aimed at creating significant shareholder value. It has already spent or committed roughly 73% of the capacity.
The company, in October 2021, completed the asset acquisition and project financing transactions of the $12-billion Jazan project in in Saudi Arabia. It expects to close the Phase Two of this project in 2023.
Last year, it also announced the $4.5 billion world-class clean energy complex in Louisiana. The project, the company’s largest-ever investment, is expected to produce more than 750 million standard cubic feet per day of blue hydrogen for local and global markets by 2026.
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. Air Products, in Apr 2022, also purchased Air Liquide's industrial gases business in the United Arab Emirates ("UAE"), including liquid bulk, packaged gases and specialty gases. APD also acquired Air Liquide's majority share in MECD, which owns and operates a liquid CO2 manufacturing site in Bahrain. By purchasing these businesses, Air Products broadened its footprint and regional presence in the UAE and Bahrain.
The company has also been benefiting from higher pricing. Higher merchant demand is also driving its volumes. Moreover, it 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 this year.
A Few Headwinds
Air Products is exposed to challenges from cost inflation. It is witnessing higher power costs in its merchant business. The company is seeing significantly higher energy costs, especially in EMEA due to the considerably high natural gas and electricity costs. It is expected to continue to face headwinds from the power cost inflation moving ahead. As such, higher power costs are likely to weigh on margins over the near term.
The company also faces headwinds from unfavorable currency translation. It witnessed significant currency headwinds in the last reported quarter, especially in Europe. Currency translation, stemming from a stronger U.S. dollar, reduced its sales and EBITDA by 5% in the quarter. In Europe, all major currencies were weaker vis-à-vis the U.S. dollar by double-digits in the quarter. The company sees continued currency headwinds moving ahead.
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
Some better-ranked stocks worth considering in the basic materials space include Daqo New Energy Corp. (DQ - Free Report) , Albemarle Corporation (ALB - Free Report) and Sociedad Quimica y Minera de Chile S.A. (SQM - Free Report) .
Daqo New Energy, currently carrying a Zacks Rank #1 (Strong Buy), has an expected earnings growth rate of 177.5% for the current year. The Zacks Consensus Estimate for DQ's earnings for the current fiscal has been revised 20.8% upward in the past 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.
Daqo New Energy’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters, the average being 10.8%. DQ has gained around 11% over a year.
Albemarle has a projected earnings growth rate of 425.7% for the current year. The consensus estimate for ALB's current-year earnings has been revised 67.9% upward in the past 60 days.
Albemarle’s earnings beat the Zacks Consensus Estimate in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 24.2%, on average. ALB has gained around 6% in a year and currently carries a Zacks Rank #1.
Sociedad has a projected earnings growth rate of 520.5% for the current year. The Zacks Consensus Estimate for SQM’s current-year earnings has been revised 34% upward in the past 60 days.
Sociedad’s earnings beat the Zacks Consensus Estimate in two of the trailing four quarters, the average being 28.2%. SQM has rallied roughly 81% in a year. The company carries a Zacks Rank #2 (Buy).