5 Reasons To Add Air Products (APD) To Your Portfolio Now
Zacks Investment Research | Mar 08, 2018 07:46AM ET
Air Products and Chemicals, Inc.'s (NYSE:APD) stock looks promising at the moment. 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.
Air Products, a Zacks Rank #2 (Buy) stock, has outperformed the industry it belongs to over the last six months. The company’s shares have moved up around 10.3% over this period, compared with roughly 7.7% gain recorded by the industry.
Let’s delve deeper into the factors that make this industrial gas giant an attractive investment option.
What's Working in Favor of APD?
Strong Q1 and Upbeat Outlook: Air Products topped earnings and revenue expectations in first-quarter fiscal 2018 (ended Dec 31, 2017). Its adjusted earnings rose 22% from the year-ago quarter to $1.79 per share and surpassed the Zacks Consensus Estimate of $1.66. Revenues also went up around 18% year over year to $2,216.6 million on higher volumes and pricing, and beat the Zacks Consensus Estimate of $2,159.2 million.
Air Products raised its earnings expectations for fiscal 2018. The company now expects adjusted earnings for fiscal 2018 to be in the range of $7.15-$7.35 per share (up from prior view of $6.85-$7.05), up 13-16% from the prior year. The guidance includes an expected benefit of 20-25 cents per share from the U.S. Tax Cuts and Jobs Act.
Air Products has built a strong project backlog. These projects are anticipated to be accretive to earnings and cash flow over the next few years. In addition, strategic investments in high-return projects, new business deals and acquisitions are expected to drive results in fiscal 2018. The company also remains on track with its cost-reduction programs, which is likely to support margins.
Estimates Northbound: Annual estimates for Air Products have moved north over the past two months, reflecting analysts’ confidence on the stock. Over this period, the Zacks Consensus Estimate for fiscal 2018 has increased by around 4.1% to $7.32 per share. The Zacks Consensus Estimate for fiscal 2019 has also moved up 3.9% over the same timeframe to $7.99.
Positive Earnings Surprise History: Air Products has an impressive earnings surprise history. It has outpaced the Zacks Consensus Estimate in each of the trailing four quarters, delivering a positive average earnings surprise of 4.7%.
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Strong Balance Sheet: Air Products ended the fiscal first quarter with cash and cash equivalents of $2,722.6 million, reflecting roughly 3% year over year increase. Total long-term debt decreased around 4% year over year to $3,414.9 million. The company remains committed to invest in its core industrial gases business leveraging its strong balance sheet to create significant value for its shareholders.
Healthy Growth Prospects: The Zacks Consensus Estimate for earnings for fiscal 2018 for Air Products is currently pegged at $7.32, reflecting an expected year-over-year growth of 16%. Moreover, earnings are expected to register a 9% growth in fiscal 2019. The company also has an expected long-term earnings per share growth of 16.3%, higher than the industry average of 10.2%.
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