Air Products (APD) Up 43% YTD: What's Driving The Rally?

Air Products and Chemicals, Inc.’s (NYSE:APD) shares have surged 43.3% year to date. The industrial gas giant has also outperformed its industry’s decline of 18.3% to over the same time frame. Moreover, it has outpaced the S&P 500’s rise of 24.8% year to date.

Air Products, a Zacks Rank #3 (Hold) stock, has a market cap of roughly $51 billion and average volume of shares traded in the last three months was around 957.9K. The company has an expected long-term earnings per share growth rate of 12.3%, above the industry average of 10%.

Let’s delve deeper into the factors behind the stock’s price appreciation.

Driving Factors

Buoyant outlook and healthy growth prospects have contributed to the rally in Air Products’ shares. 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 EPS for first-quarter fiscal 2020 in the band of $2.05-$2.10, which indicates 10-13% rise year over year.

The Zacks Consensus Estimate for earnings for fiscal 2020 of $9.48 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.

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.

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.

The company also remains committed to maximize returns to shareholders. 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.

Stocks to Consider

Some better-ranked stocks worth considering in the basic materials space include Kirkland Lake Gold Ltd. (TSX:KL) , Agnico Eagle Mines Limited (NYSE:AEM) and Franco-Nevada Corporation (TSX:FNV) .

Kirkland Lake Gold has projected earnings growth rate of 97.1% for the current year and sports a Zacks Rank #1 (Strong Buy). The company’s shares have surged around 58% in a year’s time. You can see the complete list of today’s Zacks #1 Rank stocks here.

Agnico Eagle has a projected earnings growth rate of 167.9% for the current year and carries a Zacks Rank #2 (Buy). The company’s shares have rallied roughly 47% in a year’s time.

Franco-Nevada has estimated earnings growth rate of 45.3% for the current year and carries a Zacks Rank #2. The company’s shares have shot up roughly 41% in a year’s time.

5 Stocks Set to Double

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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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