Atlantic Equities says it’s time to buy this industrial gas company with ‘proven pricing power’

Strong pricing power makes Air Products and Chemicals a good buy in the current environment even though shares have fallen more than 22% this year, according to Atlantic Equities. Analyst Colin Isaac upgraded the industrial gas company to overweight, saying in a note to clients that Air Products is well-insulated to fight inflation and is in one of the few sub-sectors in materials with proven pricing power. “Industrial gases stocks provide relatively defensive growth and the industry has proven pricing power that means even extreme inflationary pressures are quickly recovered,” Isaac said. “For APD, high energy prices are arguably a secular tailwind, boosting refining margins, short term investment in traditional energy infrastructure (e.g. LNG) while lending further support to decarbonization and alternative energy projects.” Among the reasons for liking the stock, Isaac pointed to the company’s $15 billion project backlog in areas like blue and green hydrogen and gasification, which could support 50% earnings per share growth through 2027. The firm also upped its price target on the stock to $290 a share, which implies a potential 22.5% gain from Tuesday’s close price. “We see scope for the shares to reverse recent underperformance as earnings momentum recovers and if confidence in the project backlog improves,” Isaac said. — CNBC’s Michael Bloom contributed reporting

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