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Air Products (APD) Shares Up 14% in 3 Months: Here's Why

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Air Products and Chemicals, Inc.’s (APD - Free Report) shares have gained 13.6% over the past three months. The company has also outperformed its industry’s rise of 5.3% over the same time frame. It has also topped the S&P 500’s roughly 6.2% decline over the same period.

Let’s take a look into the factors that are driving this Zacks Rank #3 (Hold) company.

 

Zacks Investment Research
Image Source: Zacks Investment Research

 

What’s Favoring the Stock?

Better-than-expected earnings performance in the fiscal fourth quarter and upbeat outlook for fiscal 2023 have contributed to the gain in the company's shares. Air Products’ adjusted earnings of $2.89 per share for fourth-quarter fiscal 2022 beat the Zacks Consensus Estimate of $2.77. Revenues climbed around 26% year over year to $3,570 million, topping the Zacks Consensus Estimate of $3,279.7 million.

The industrial gases giant gained from increased pricing, higher volumes and higher energy cost pass-through in the quarter. Volumes were driven by new plants, recovery in hydrogen and improved merchant demand. The company witnessed improved pricing in the three largest regional segments.

Air Products, in its fourth-quarter call, said that it expects full-year fiscal 2023 adjusted earnings per share of $11.20-$11.50, indicating a 9-12% year-over-year growth. For the first quarter of fiscal 2023, the company expects adjusted earnings per share in the range of $2.60 -$2.80, suggesting a rise of 5-13% 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. The company has a total available capacity to deploy (over fiscal 2018-2027) around $36.5 billion in high-return investments aimed at creating significant shareholder value. It has already spent or committed roughly 73% of the capacity.

The company is also 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 been benefiting from higher pricing. Higher merchant demand is also driving its volumes.

Air Products also remains committed to maximize returns to shareholders leveraging strong balance sheet and cash flows. The company, earlier this year, increased its quarterly dividend by 8% to $1.62 per share from $1.50 per share. This marked the 40th straight year of dividend increase. The company expects to pay more than $1.4 billion of dividend to shareholders in calendar 2022.

 

 

Zacks Rank & Key Picks

Better-ranked stocks worth considering in the basic materials space include Sociedad Quimica y Minera de Chile S.A. (SQM - Free Report) , Commercial Metals Company (CMC - Free Report) and Reliance Steel & Aluminum Co. (RS - Free Report) .

Sociedad has a projected earnings growth rate of 538.1% for the current year. The Zacks Consensus Estimate for SQM’s current-year earnings has been revised 1.2% upward in the past 60 days.

Sociedad has a trailing four-quarter earnings surprise of roughly 27.2%. SQM has rallied roughly 48% in a year. The company currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Commercial Metals currently carries a Zacks Rank #1. The Zacks Consensus Estimate for CMC's current-year earnings has been revised 4.1% upward in the past 60 days.

Commercial Metals’ earnings beat the Zacks Consensus Estimate in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 19.7%, on average. CMC has gained around 35% in a year.

Reliance Steel, currently carrying a Zacks Rank #2 (Buy), has a projected earnings growth rate of 29.7% for the current year. The Zacks Consensus Estimate for RS's current-year earnings has been revised 0.1% upward in the past 60 days.

Reliance Steel’s earnings beat the Zacks Consensus Estimate in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 13.6%, on average. RS has gained around 27% in a year.

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