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Air Products (APD) Stock Up 45% YTD: What's Behind the Rally?

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Shares of Air Products and Chemicals, Inc. (APD - Free Report) have surged around 44.6% so far this year. The industrial gases giant has also significantly outperformed its industry’s decline of roughly 17.5% over the same time frame. Moreover, it has trounced the S&P 500’s gain of around 19.5% year to date.

Air Products has a market cap of roughly $51.3 billion and average volume of shares traded in the last three months was around 1,184K. The company has an expected long-term earnings per share growth rate of 12.3%, above the industry average of 11.2%.


Let’s take a look into the factors that are driving this Zacks Rank #2 (Buy) stock.

What’s Going in APD’s Favor?

Upbeat outlook and healthy growth prospects have contributed to the run-up in Air Products’ shares. The company is poised for growth on the back of its project investments, new business deals and acquisitions.

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.

Annual earnings estimates for Air Products have been going up over the past three months. Over this period, the Zacks Consensus Estimate for fiscal 2019 has increased by around 0.5%. The Zacks Consensus Estimate for fiscal 2020 has also moved up roughly 0.4% over the same timeframe.

Growth prospects for Air Products look encouraging. The Zacks Consensus Estimate for earnings for fiscal 2019 of $8.22 reflects an expected year-over-year growth of 10.3%. Moreover, earnings are expected to register a 13.8% growth in fiscal 2020.

Air Products’ strategic investments in high-return projects, productivity actions and contributions of acquisitions should drive its fiscal 2019 results. Notably, the Lu'An syngas project in China, which is now fully onstream, is contributing to the results in the company’s Industrial Gases – Asia segment. 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.

Moreover, the acquisition of ACP Europe SA, the largest independent carbon dioxide business in Continental Europe, enables Air Products to serve existing customers better and tap new industrial gas growth opportunities. The buyout provides the company a strong platform to pursue further industrial gas growth in Europe.

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.

Stocks to Consider

Other top-ranked stocks worth considering in the basic materials space include Materion Corporation (MTRN - Free Report) , Flexible Solutions International Inc (FSI - Free Report) and Innospec Inc. .

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 20% over the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.

Flexible Solutions has an expected earnings growth rate of 342.9% for the current fiscal year and carries a Zacks Rank #1. Its shares have surged around 144% 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 have gained roughly 21% in the past year.

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