Air Products and Chemicals, Inc. (APD Quick QuoteAPD - Free Report) 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 gained 26% over a year compared with the Zacks Chemicals Diversified industry’s 7.1% rise.

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Let’s find out why APD 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. 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.

The company also remains committed to maximizing returns to shareholders leveraging strong balance sheet and cash flows. Air Products’ board, earlier this year, 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 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 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 carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the Basic Materials space are Methanex Corporation (MEOH Quick QuoteMEOH - Free Report) , Axalta Coating Systems Ltd. (AXTA Quick QuoteAXTA - Free Report) and Ingevity Corporation (NGVT Quick QuoteNGVT - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Methanex’s current-year earnings has increased by 20.7% in the past 60 days. MEOH beat the consensus estimate in each of the last four quarters with the average surprise being 101%. Its shares have gained roughly 12% in the past year.

The Zacks Consensus Estimate for Axalta Coating’s current year earnings is pegged at $2.15, indicating a rise of 36.9% from year-ago levels. The Zacks Consensus Estimate for AXTA’s current year earnings has increased 3.9% in the past 60 days. The stock has rallied around 26% in the past year. 

Ingevity beat the consensus estimate in three of the last four quarters while missed once. In this timeframe, it delivered an earnings surprise of 95.4%, on average. NGVT’s shares have gained roughly 26% in the past year.