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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 company’s shares have surged around 40% year to date. The industrial gases giant is poised for growth on the back of its project investments, new business deals and acquisitions.

We are positive on the company’s prospects and believe that the time is right for you to add the stock to 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.

An Outperformer

Air Products has outperformed the industry it belongs to over a year. The company’s shares have popped 33.7% compared with roughly 35.5% decline recorded by the industry. Moreover, it has trounced the S&P 500’s gain of around 2.2%.



 

 

Upbeat Outlook

Air Products, in July, said that it now expects adjusted earnings for fiscal 2019 in the range of $8.20-$8.25 per share. This suggests more than 10% rise year over year at the midpoint. The company also expects adjusted earnings for fourth-quarter fiscal 2019 in the band of $2.26-$2.31 per share, which indicates 13-16% rise year over year.

Healthy Growth Prospects

Growth prospects for Air Products look encouraging. The Zacks Consensus Estimate for earnings for fiscal 2019 of $8.24 for Air Products reflects an expected year-over-year growth of 10.6%. Moreover, earnings are expected to register a 13.8% growth in fiscal 2020. The company also has an expected long-term earnings per share growth of 12.1%, above the industry average of 10.4%.

Capital Deployment

Air Products remains committed to maximize returns to shareholders leveraging strong cash flow. It generated more than $2.5 billion of distributable cash flow during the twelve months ending third-quarter fiscal 2019. This distributable cash flow enabled it to pay roughly $1 billion or around 40% as dividends to shareholders.

Superior Return on Equity (ROE)

Air Products’ ROE of 15.4%, as compared with the industry average of 10.4%, manifests the company’s efficiency in utilizing shareholder’s funds.

Growth Drivers in Place

Air Products’ strategic investments in high-return projects, productivity actions and contributions of acquisitions should drive its fiscal 2019 results.

The company remains committed to boost productivity to improve its cost structure. It is seeing positive impact of its productivity actions and expects to benefit from additional productivity and cost improvement programs in fiscal 2019. Productivity actions should lend support to its margins.

Moreover, new projects, especially the Lu'An syngas project in China, are contributing to volume growth in the company’s Industrial Gases – Asia segment. The company also expects to close the Jazan gasifier and power project in Saudi Arabia by the end of 2019. It is working on a number of gasification projects globally.

Air Products remains focused on deploying capital in high-return industrial gas projects. It has a total available capacity to deploy (over fiscal 2018-2022) nearly $17 billion in high-return investments, aimed at creating significant shareholder value. Air Products has already spent or committed more than half of this capacity.

Other Stocks to Consider

Other top-ranked stocks worth a look in the basic materials space include Arconic Inc (ARNC - Free Report) , Kinross Gold Corporation (KGC - Free Report) and Alamos Gold Inc. (AGI - Free Report) .

Arconic has an estimated earnings growth rate of 50% for the current year and sports a Zacks Rank #1 (Strong Buy). Its shares have moved up 20% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.

Kinross has projected earnings growth rate of 160% for the current year and carries a Zacks Rank #1. The company’s shares have surged around 89% in a year’s time.

Alamos Gold has estimated earnings growth rate of 320% for the current year and carries a Zacks Rank #2. The company’s shares have rallied roughly 35% in a year’s time.

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