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Here's Why You Should Hold Onto Air Products (APD) Stock Now

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Air Products and Chemicals, Inc.’s (APD - Free Report) is poised for growth on the back of its project investments, new business deals and acquisitions.

Shares of this industrial gases giant are down 2.7% over a year compared with the 49.8% decline of its industry.


 

Let’s find out why this Zacks Rank #3 (Hold) stock is worth retaining at the moment.

Factors Aiding Air Products

Air Products, on its fiscal first-quarter earnings call, said that it expects adjusted earnings of $9.35-$9.60 per share for fiscal 2020, suggesting a 14-17% rise from the year-ago reported figure. The company also expects adjusted earnings of $2.10-$2.20 for second-quarter fiscal 2020, indicating a 9-15% rise year over year.

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. Notably, the company’s latest project in the United States, which is worth $500 million, showcases its core strengths and capabilities for supplying nitrogen from an air separation unit and hydrogen from a steam methane reformer. This marks Air Products' largest investment so far in the United States. The project will likely boost the size and supply capacity of the company’s extensive hydrogen pipeline system in the Gulf Coast.

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

Moreover, Air Products remains committed to maximizing returns to shareholders. The company’s board, earlier this year, increased its quarterly dividend by more than 15% to $1.34 per share from $1.16, marking the largest dividend hike in its history. This also marks the 38th straight year of a dividend increase.

A Few Concerns

Air Products faces some headwind from higher expected maintenance spending in the fiscal second quarter. It expects higher maintenance costs for the quarter due to planned life extension work on certain facilities. Higher costs may affect margins in its Industrial Gases — Americas segment.

Moreover, the company’s Industrial Gases — Asia segment faces challenges in the fiscal second quarter from the Chinese Lunar New Year holiday which was extended by the Chinese authorities to contain the outbreak of coronavirus. The company expects slowdown due to the Chinese New Year to impact growth in the second quarter. This is likely to impact sales and margins in Air Products’ Asia business.  
 

Stocks to Consider

Better-ranked stocks worth considering in the basic materials space are NovaGold Resources Inc. (NG - Free Report) , Daqo New Energy Corp. (DQ - Free Report) and Barrick Gold Corporation (GOLD - Free Report) .

NovaGold has a projected earnings growth rate of 11.1% for 2020. It currently carries a Zacks Rank #1 (Strong Buy). The company’s shares have surged roughly 62% in a year. You can see the complete list of today’s Zacks #1 Rank stocks here.

Daqo New Energy has a projected earnings growth rate of 422.8% for 2020. The company’s shares have rallied around 57% in a year. It currently sports a Zacks Rank #2 (Buy).

Barrick Gold currently has a Zacks Rank #2 and a projected earnings growth rate of 43% for 2020. The company’s shares have rallied around 26% in a year.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

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