Air Products and Chemicals, Inc. APD is expected to benefit from its investments in high-return industrial gas projects and productivity measures. Higher volumes and pricing is also likely to support its results amid currency headwinds.
The company’s shares are up 5.4% over a year, compared with a 0.1% decline recorded by its industry.
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Air Products, a Zacks Rank #3 (Hold) stock, is benefiting from investments in high-return projects, new business deals, acquisitions and productivity initiatives. It remains committed to its gasification strategy and is executing its growth projects. These projects are expected to be accretive to earnings and cash flows. APD is realizing the benefits of the completion of the second phase of the Jazan project in Saudi Arabia. The company has a total available capacity to deploy (over fiscal 2018-2027) $31.8 billion in high-return investments aimed at creating significant shareholder value.
Air Products is also driving productivity to improve its cost structure. It is seeing the positive impacts of its productivity actions. Benefits from additional productivity and cost improvement programs are likely to support its margins moving ahead. It is also expected to benefit from higher pricing and volumes.
The company, in its fiscal third quarter call, said that it expects full-year fiscal 2023 adjusted earnings per share (EPS) of $11.40-$11.50, indicating 11-12% growth from the prior year’s adjusted EPS. For the fourth quarter of fiscal 2023, the company expects adjusted EPS in the range of $3.04-$3.14, suggesting a rise of 7-10% from fourth-quarter fiscal 2022 adjusted EPS.
Air Products also remains committed to maximize returns to shareholders leveraging strong balance sheet and cash flows. APD, earlier this year, increased its quarterly dividend by 8% to $1.75 per share from $1.62 per share. This marked the 41st straight year of dividend increase. The company expects to pay more than $1.5 billion in dividends to shareholders in 2023.
However, Air Products is exposed to headwinds from unfavorable currency translation. The company saw currency headwinds in its Asia segment in the last reported quarter due to the weakening of Asian currencies vis-à-vis the U.S. dollar, which reduced its sales and EBITDA for the unit by 5% in the quarter. It is likely to face continued currency headwinds in the fiscal fourth quarter.
The slowdown in China and Europe may also affect the company’s business in these regions. The cooling China economy might impact volumes in the Industrial Gases - Asia segment. The lack of growth in industrial output in Europe is another concern.
Air Products and Chemicals, Inc. Price and Consensus
Air Products and Chemicals, Inc. price-consensus-chart | Air Products and Chemicals, Inc. Quote
Stocks to Consider
Better-ranked stocks worth a look in the basic materials space include Carpenter Technology Corporation CRS, PPG Industries, Inc. PPG and Universal Stainless & Alloy Products, Inc. USAP.
The Zacks Consensus Estimate for current fiscal-year earnings for CRS is currently pegged at $3.43, implying year-over-year growth of 200.9%. Carpenter Technology currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Carpenter Technology has a trailing four-quarter earnings surprise of roughly 10%, on average. The stock has rallied around 54% in a year.
PPG Industries currently carries a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for PPG's current-year earnings has been revised 3.6% upward over the past 60 days.
PPG Industries’ earnings beat the Zacks Consensus Estimate in three of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 7.3%, on average. PPG shares have gained around 4% in a year.
Universal Stainless & Alloy Products currently carrying a Zacks Rank #2. It has a projected earnings growth rate of 160.8% for the current year.
The Zacks Consensus Estimate for USAP's current-year earnings has been revised 181% upward over the past 60 days. USAP shares are up around 64% in a year.
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