Here's Why You Should Add Air Products (APD) To Your Portfolio
Zacks Investment Research | Dec 18, 2019 06:59AM ET
Air Products and Chemicals, Inc.’s (NYSE:APD) stock looks promising at the moment. The company’s shares have surged around 47% 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 shot up 52.9% compared with roughly 14.8% decline recorded by the industry.
Upbeat Outlook
Air Products 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. The company also expects 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.
Healthy Growth Prospects
Growth prospects for Air Products look encouraging. The Zacks Consensus Estimate for earnings for fiscal 2020 of $9.48 for Air Products 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. The company also has an expected long-term earnings per share growth of 12.3%, above the industry average of 10%.
Capital Deployment
Air Products remains committed to maximize returns to shareholders leveraging strong cash flow. 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.
Superior Return on Equity (ROE)
Air Products’ ROE of 15.9%, as compared with the industry average of 10.9%, manifests the company’s efficiency in utilizing shareholder’s funds.
Growth Drivers in Place
Air Products’ investments in high-return projects, new project wins and productivity actions should drive its fiscal 2020 results. The company expects the Jazan gas and power project in Saudi Arabia to contribute to the growth in its adjusted 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.
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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.
Moreover, Air Products remains focused on boosting productivity to improve its cost structure. The company is seeing positive impact of its productivity actions and is expected to benefit from additional productivity and cost improvement programs in fiscal 2020.
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