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 21.8% in a year against the Zacks Chemicals Diversified industry’s 16.1% 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. Currently, APD has two major projects undergoing execution — the NEOM green hydrogen project in Saudi Arabia and the Louisiana Clean Energy Complex. While the NEOM project is expected to commence production at the end of 2026, the Louisiana Clean Energy Complex is anticipated to do so in 2028.  

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. Air Products expects productivity benefits of at least $75 million in fiscal 2025. 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 January 2025, increased its quarterly dividend to $1.79 per share from $1.77. This marked the 43rd straight year of dividend increase. The company expects to return roughly $1.6 billion to shareholders through dividends in 2025. It generated an operating cash flow of around $812 million in first-quarter fiscal 2025 (ended Dec. 31, 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. The company is seeing no material improvement in China and expects the market to remain challenging over the near term.

Air Products is also seeing weak demand for merchant products in Europe. Its volumes in Europe were down 5% year over year in the fiscal first quarter, reflecting weaker merchant demand. The lack of growth in industrial output in Europe is a concern for the near term. The Uzbekistan facility upgrades also impacted volumes in Europe in the first quarter. The company sees continued headwinds from the Uzbekistan plant maintenance in the fiscal second quarter.

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 & Key Picks

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

Better-ranked stocks in the Basic Materials space include Axalta Coating Systems Ltd. AXTA, Ingevity Corporation NGVT and Carpenter Technology Corporation CRS. While AXTA and NGVT sport a Zacks Rank #1 (Strong Buy) each, CRS carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Axalta Coating’s 2025 earnings is pegged at $2.55, indicating a rise of 8.5% from year-ago levels. AXTA beat the consensus estimate in each of the trailing four quarters. In this time frame, it has delivered an earnings surprise of roughly 16.3%, on average. 

The Zacks Consensus Estimate for Ingevity’s 2025 earnings is pegged at $4.45, indicating a rise of 26.8% from year-ago levels. The consensus estimate for NGVT’s 2025 earnings has increased by 29% in the past 60 days. 

The consensus estimate for Carpenter Technology for the current fiscal year stands at $6.95, suggesting a 46.6% year-over-year increase. CRS beat the Zacks Consensus Estimate in each of the past four quarters, with the average earnings surprise being 15.7%. 

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

Axalta Coating Systems Ltd. (AXTA) : Free Stock Analysis Report

Ingevity Corporation (NGVT) : Free Stock Analysis Report

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

Zacks Investment Research