Here's Why You Should Retain Air Products Stock in Your Portfolio

Air Products and Chemicals, Inc. APD is benefiting from investments in high-return projects, new business deals, acquisitions and productivity initiatives amid headwinds from weak helium prices and softness in Europe.

The company’s shares have gained 3.3% over a year compared with the Zacks Chemicals Diversified industry’s 4.2% rise.

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Let’s find out why APD stock is worth retaining at the moment.

High-Return Projects & Productivity Actions Aid Air Products

Air Products is well-placed to gain from its investments in high-return industrial gas projects and productivity measures. It remains focused on its gasification strategy and is executing its key growth projects. These projects are expected to be accretive to earnings and cash flows.

The company has an industrial gas backlog of roughly $3 billion in projects, mainly supporting electronics customers. It plans to invest about $1.5 billion annually in traditional industrial gas projects. 

Air Products is currently pursuing the NEOM green hydrogen project in Saudi Arabia. The project is expected to supply up to 1.2 million tons per year of renewable ammonia. Air Products and Yara International have finalized a marketing and distribution agreement for renewable ammonia from the project. Under the deal, Yara will transport and market green ammonia not sold by Air Products as renewable hydrogen. 

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. The company also remains focused on improving pricing amid an inflationary environment. Air Products is also taking action to right-size the organization through headcount reductions and expects these reductions to result in $250 million in annual cost savings once completed. It has already realized roughly $75 million in savings from headcount reductions, as divulged in its fiscal third-quarter earnings call.

Weak Helium Prices & Softness in Europe Ail APD

Despite improving volumes, Air Products faces headwinds from lower helium prices. It saw pressure on helium pricing in the most recent quarter. Helium-related headwinds on earnings in the fiscal third quarter were roughly 2%. Air Products sees a roughly 2% and 3% headwind for the fiscal fourth quarter and fiscal 2026, respectively. Lower helium pricing is expected to continue to offset some of the benefits from stronger on-site volumes, electronics demand and pricing initiatives. 

Air Products remains exposed to a challenging macroeconomic environment. Weak industrial activity could limit merchant gas demand, pressure volumes and reduce pricing power in certain end markets. Europe remains a difficult market with limited industrial growth. Industrial markets are not expanding, while parts of Asia outside electronics also remain challenged. Sluggish demand could limit volume growth and make earnings increasingly dependent on pricing actions and cost controls.

Air Products and Chemicals, Inc. Price and Consensus

Air Products and Chemicals, Inc. price-consensus-chart | Air Products and Chemicals, Inc. Quote

APD’s Zacks Rank & Other Key Picks

APD currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Basic Materials space are Worthington Steel, Inc. WS, Carpenter Technology Corporation CRS and Avient Corporation AVNT. WS currently carries a Zacks Rank #1 (Strong Buy), while CRS and AVNT carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for WS’s current-year earnings stands at $3.4 per share, implying a 52.5% year-over-year increase. Its earnings beat the Zacks Consensus Estimate in two of the trailing four quarters and missed twice, with the negative average surprise being 13.8%. 

The Zacks Consensus Estimate for CRS’s current fiscal-year earnings is pegged at $12.92 per share, implying a 20.1% year-over-year increase. Its earnings beat the Zacks Consensus Estimate in all of the trailing four quarters, with the average surprise being 8.4%. 

The Zacks Consensus Estimate for AVNT’s current-year earnings is pegged at $3.2 per share, indicating a 13.5% year-over-year increase. Its earnings beat the Zacks Consensus Estimate in all of the trailing four quarters, with the average surprise being 3.4%.

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This article originally published on Zacks Investment Research (zacks.com).

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