Air Products and Chemicals, Inc.’s APD shares have gained 13.5% over the past month. The company has also outperformed the Zacks Chemicals Diversified industry’s decline of 2.2% over the same time frame. APD has also topped the S&P 500’s 0.5% rise over the same period.
Let’s dive into the factors behind APD stock’s price appreciation.
APD’s One-month Price Performance
What’s Driving APD’s Stock?
APD’s gains reflect its recent move to exit the Louisiana Clean Energy Complex (LCEC) project, as expected financial returns fail to meet its stringent return criteria. APD also said that it is finalizing a marketing and distribution agreement for renewable ammonia from the NEOM Green Hydrogen Project in Saudi Arabia with Yara International ASA.
Air Products also decided to discontinue its proposed zero-carbon liquid hydrogen plant in Casa Grande, AZ, along with several small-scale clean energy distribution projects. The move reflects challenging market conditions, project-specific economic hurdles and slower-than-anticipated growth in specific markets, especially hydrogen for mobility. The LCEC project exit and other portfolio actions are expected to result in pre-tax charges not exceeding $2.9 billion in APD's fiscal third quarter. APD plans to maximize the redeployment of certain assets to current or future projects.
These strategic actions to streamline the company's clean energy strategy and optimize its project portfolio removed a major investor overhang, driving the stock higher. The company's disciplined focus on portfolio optimization and higher-return opportunities has also strengthened investor confidence in its long-term growth prospects.
Air Products reaffirmed its commitment to expanding its presence in Louisiana, where it operates 18 industrial gas plants and the world's largest hydrogen pipeline network, supplying refinery customers across the U.S. Gulf Coast. Through its agreement with Yara, the company will also utilize Yara’s global supply chain to market and distribute renewable ammonia worldwide.
Meanwhile, Air Products remains focused on 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. 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 $50 million in savings from headcount reduction, as divulged in its fiscal second quarter earnings call.
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).
Better-ranked stocks in the Basic Materials space are L.B. Foster Company FSTR, Albemarle Corporation ALB and Perimeter Solutions, Inc. PRM. FSTR, ALB and PRM carry a Zacks Rank #1 (Strong Buy), each. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for L.B. Foster’s current-year earnings is pegged at $1.74 per share, implying a 152.2% year-over-year increase. The Zacks Consensus Estimate for FSTR’s current-year earnings has been revised 6.1% higher over the past 60 days.
The consensus estimate for Albemarle’s current-year earnings is pegged at $12.98 per share, indicating a 1,743.2% year-over-year increase. ALB’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters and missed once, with an average surprise of 54.1%.
The Zacks Consensus Estimate for Perimeter Solutions’ current-year earnings stands at $1.78 per share, implying a 32.8% year-over-year increase. The Zacks Consensus Estimate for PRM’s current-year earnings has been revised 21.1% higher over the past 60 days.
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