Here's Why You Should Hold Onto Air Products Stock for Now

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

The company's shares have lost 9.6% over a year compared with a 10.6% decline of its industry.

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Let's find out why this Zacks Rank #3 (Hold) stock is worth retaining at the moment.

High-return Projects and Productivity Actions Aid APD Stock

Air Products is well-placed to benefit 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. The company has a total available capacity to deploy (over fiscal 2024-2033) $30.8 billion in high-return investments aimed at creating significant shareholder value.

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.

The company also remains committed to maximizing returns to shareholders leveraging strong balance sheet and cash flows. Air Products' board, in January 2024, increased its quarterly dividend to $1.77 per share. This marked the 42nd straight year of dividend increase. APD paid roughly $1.5 billion in dividends to shareholders in 2023. It expects to return roughly $1.6 billion to shareholders through dividends in 2024.

Softness in China & Europe a Worry for Air Products

The slowdown in China and Europe may affect APD's business in these regions. The sluggish China economy is impacting volumes in the Industrial Gases - Asia segment. A slower economic recovery in China and the softness in electronics may continue to affect the segment's volumes.

Air Products is also seeing weak demand for merchant products in Europe. Its volumes in Europe rose modestly year-over-year in the fiscal third 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.

Stocks to Consider

Better-ranked stocks in the Basic Materials space are, Hawkins, Inc. HWKN, Element Solutions Inc ESI and Eldorado Gold Corporation EGO, each sporting a Zacks Rank #1 (Strong Buy).

The Zacks Consensus Estimate for Hawkins' current fiscal-year earnings is pegged at $4.14, indicating a rise of 15.3% from year-ago levels. The Zacks Consensus Estimate for HWKN's current fiscal-year earnings has increased 12.8% in the past 60 days. The stock has rallied around 101% in the past year.

The consensus estimate for Element Solutions' current-year earnings has increased by 0.7% in the past 60 days. ESI beat the consensus estimate in three of the last four quarters while delivering in-line results on the other occasion. In this timeframe, it delivered an earnings surprise of around 3.8%, on average.

The Zacks Consensus Estimate for Eldorado Gold's current year earnings is pegged at $1.35 per share, indicating a year-over-year rise of 136.8%. EGO beat the consensus estimate in each of the last four quarters, with the average earnings surprise being 430.3%. The company's shares have rallied roughly 64% in the past year.

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