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Air Products' (APD) Shares Rally 43% in a Year: Here's Why

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Air Products and Chemicals, Inc.’s (APD - Free Report) shares have popped 43% over the past year. The company has also outperformed its industry’s decline of 18.4% to over the same time frame.

Air Products, a Zacks Rank #3 (Hold) stock, has a market cap of roughly $51 billion and average volume of shares traded in the last three months was around 951.8K. The company has an expected long-term earnings per share growth rate of 12.3%, above the industry average of 10.2%.


 

Let’s take a look into the factors that are driving this industrial gas giant.

What’s Going in APD’s Favor?

Healthy growth prospects and upbeat outlook for fiscal 2020 have contributed to the run-up in Air Products’ shares. The company expects adjusted earnings for fiscal 2020 in the range of $9.35-$9.60 per share. This calls for a 14-17% rise year over year. It also sees adjusted earnings per share for first-quarter fiscal 2020 in the band of $2.05-$2.10, which indicates 10-13% rise year over year.

The Zacks Consensus Estimate for earnings for fiscal 2020 of $9.48 reflects an expected year-over-year growth of 15.5%. Moreover, earnings are expected to register a 11.8% growth in the fiscal first quarter.

Air Products’ productivity actions, investments in high-return projects and new project wins should drive its fiscal 2020 results. The company is boosting productivity to improve its cost structure. It is seeing positive impact of its productivity actions and is expected to benefit from additional productivity and cost improvement programs in fiscal 2020.

Air Products is also poised for growth on the back of its project investments. The company expects the Jazan gas and power project in Saudi Arabia to contribute to the growth in its adjusted earnings per share in fiscal 2020. The Lu'An syngas project in China is also contributing to the results in the company’s Industrial Gases – Asia segment.

The company has a total available capacity to deploy (over fiscal 2018-2022) nearly $18 billion in high-return investments, aimed at creating significant shareholder value. It has already spent or committed more than half of this capacity.

Air Products also remains committed to maximize returns to shareholders. It generated roughly $2.7 billion of distributable cash flow during fiscal 2019. This marks an increase of nearly 20% from fiscal 2018 levels. This distributable cash flow enabled it to pay roughly $1 billion or around 40% as dividends to shareholders.

Stocks to Consider

Some better-ranked stocks worth considering in the basic materials space include Daqo New Energy Corp. (DQ - Free Report) , Pan American Silver Corp. (PAAS - Free Report) and Sibanye Gold Limited , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Daqo New Energy has projected earnings growth rate of 294.7% for 2020. The company’s shares have rallied roughly 122% in a year’s time.

Pan American Silver has estimated earnings growth rate of 38.1% for 2020. The company’s shares have shot up roughly 57% in a year’s time.

Sibanye Gold has projected earnings growth rate of 587.5% for 2020. The company’s shares have surged around 232% over a year.

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