On Jan 6, Zacks Investment Research upgraded industrial gas giant Air Products & Chemicals Inc. (APD) to a Zacks Rank #2 (Buy) from a Zacks Rank #3 (Hold).
Why the Upgrade?
Air Products is benefiting from a diverse customer base, cost-reduction measures and sustained pricing power. New business deals and strategic investments are expected to support results in fiscal 2015.
Air Products reported strong fourth-quarter fiscal 2014 (ended Sep 30, 2014) results wherein its adjusted earnings beat the Zacks Consensus Estimate. Sales went up in the quarter as a decline in the Tonnage Gases division was offset by gains in other businesses. Revenues in the core Merchant Gases segment were driven by higher volumes in key regions and positive pricing in U.S./Canada, Europe and Latin America.
Air Products has also witnessed upward estimate revisions since the release of its fourth-quarter results. The Zacks Consensus Estimate for earnings for fiscal 2015 has increased 1.6% to $6.47 per share. Moreover, the Zacks Consensus Estimate for fiscal 2016 has risen 1.8% to $7.19 per share.
Air Products is also gaining from incremental opportunities in the liquefied natural gas (“LNG”) market. The company has been chosen for a major off-shore LNG project in Malaysia, representing a key milestone for its LNG technology and equipment.
Air Products is primarily focused on refinery hydrogen, which yields 30% of its revenues. Over the next 10 years, the company expects an increase in global hydrogen demand and has a number of refinery projects in the pipeline.
Air Products is also working with Hyundai Motor Company Australia (“HMCA”) for fueling the latter’s first hydrogen-powered car. Hyundai’s hydrogen-powered zero-emission fuel cell electric vehicle (“FCEV”), Hyundai ix35, will be imported to Australia to demonstrate its technological advantages. Air Products is working with Hyundai and other vehicle manufacturers to expand its footprint in the hydrogen fueling market, globally.
Other Stocks to Consider
Other companies in the diversified chemical space worth considering include PPG Industries Inc. (PPG), Johnson Matthey plc (JMPLY) and Kronos Worldwide, Inc. (KRO), all carrying a Zacks Rank #2 (Buy).
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