Like a lot of industrial stocks, shares of Air Products and Chemicals, Inc. (APD) have surged over the last few months as the global economic recovery gains traction. The stock is up more than 36% since July 1, for instance.
In spite of the nice run, valuation remains in check as earnings estimates have climbed along with the stock. The company expects double-digit earnings growth in 2011, and analysts are calling for 11% growth in 2012.
It is a Zacks #2 Rank (Buy) stock.
Fourth Quarter Results
Air Products delivered a strong fourth quarter back in October. Earnings per share came in at $1.35, beating the Zacks Consensus Estimate by 3 cents. It was an 18% increase over the same quarter in 2009.
Total sales were up 10% year-over-year driven by 8% volume growth. Revenue was up in each segment, led by a 20.5% increase in Electronics and Performance Materials . The Tonnage Gases division was also strong, with top-line growth of 17.5%.
Meanwhile, operating income surged 22% as the company was able to leverage its selling and administrative expenses.
Outlook
In the Q4 earnings report, Air Products gave initial earnings guidance of $5.50 to $5.70 per share for 2011. The Zacks Consensus Estimate is within this range at $5.68. This represents a 13% increase over 2010 EPS. The 2012 estimate is currently $6.29, corresponding to 11% growth.
The company reports its results for the first quarter of 2011 on January 21. It is a Zacks #2 Rank (Buy) stock.
Dividend
Air Products pays a dividend that yields 2.2%. Over the last 10 years, the company has raised its dividend at a compound annual growth rate of 10.1%.
Air Products has a payout ratio of 39%, in-line with its competitors. Praxair (PX), for instance, also pays out 39%, and Airgas (ARG) pays out 33%.
Valuation
Shares trade at 15.6x forward earnings, in-line with the peer group. Its PEG ratio is a reasonable 1.6.
Company Description
Air Products and Chemicals, Inc. is the second largest industrial gas supplier in North America and the fourth largest in the world.
The company serves customers in industrial, energy, technology, and healthcare markets worldwide with a unique portfolio of atmospheric gases, process and specialty gases, performance materials, and equipment and services.
The company is headquartered in Allentown, Pennsylvania and has a market cap of $18.9 billion.
Todd Bunton is the Growth & Income Stock Strategist for Zacks.com.
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