Air Products and Chemicals, Inc. APD benefits from its project investments, productivity actions and new business deals amid the softness in China and Europe.

The company’s shares have gained 4.8% over a year compared with the Zacks Chemicals Diversified industry’s 11.2% decline.

Image Source: Zacks Investment Research

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 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. Air Products’ carbon-free green hydrogen joint venture (JV) project in Saudi Arabia with NEOM and ACWA Power is also on track. The JV is building the world’s largest green hydrogen facility to produce green ammonia at scale. Roughly 60% of construction work is complete and the project is expected to come on stream in end-2026.  

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.

APD also remains committed to maximizing returns to shareholders leveraging strong balance sheet and cash flows. Air Products’ board, in early 2024, increased its quarterly dividend to $1.77 per share. This marked the 42nd straight year of dividend increase. APD expects to return roughly $1.6 billion to shareholders through dividends for 2024.

Softness in China & Europe a Concern for APD

The slowdown in China and Europe may affect Air Products’ business in these regions. The sluggish China economy remains a headwind over the near term. A slower economic recovery in China and the softness in electronics may affect volumes. APD has provided a conservative forecast for the first quarter of fiscal 2025 factoring in the concerns about economic activities in China.

Air Products is also seeing weak demand for merchant products in Europe. Its volumes in Europe were flat in the fiscal fourth quarter as the contribution of the new assets in Uzbekistan offset weaker merchant volumes. The lack of growth in industrial output in Europe is a concern for the near term.

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 sports a Zacks Rank #3 (Hold).

Better-ranked stocks in the Basic Materials space are Carpenter Technology Corporation CRS, ICL Group Ltd ICL and Gold Royalty Corp. GROY. While both CRS and GROY sport a Zacks Rank #1 (Strong Buy), ICL carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Carpenter Technology beat the Zacks Consensus Estimate in each of the last four quarters, with the average earnings surprise being 14.1%. CRS’ shares have soared 160% in the past year. 

Gold Royalty beat the consensus estimate in three of the trailing four quarters while delivering in-line results on the other occasion. In this time frame, it has delivered an earnings surprise of roughly 125%, on average. GROY has expected earnings growth of 66.7% for the current year. 

The Zacks Consensus Estimate for ICL Group’s current-year earnings has increased by 2.9% in the past 60 days. ICL beat the consensus estimate in each of the last four quarters with the average surprise being 18.1%.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Air Products and Chemicals, Inc. (APD) : Free Stock Analysis Report

Carpenter Technology Corporation (CRS) : Free Stock Analysis Report

ICL Group Ltd. (ICL) : Free Stock Analysis Report

Gold Royalty Corp. (GROY) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research