Why Citigroup Upgraded Air Products & Chemicals (ADP)

NEW YORK (TheStreet) -- Citigroup upgraded Air Products & Chemicals (ADP) to "buy" with a $133 price target after meetings with management suggested that consensus expectations could be too low. 

The commodity chemical producer closed Wednesday's session at $117.47. 

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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TheStreet Ratings team rates AIR PRODUCTS & CHEMICALS INC as a Buy with a ratings score of A. The team has this to say about their recommendation:

"We rate AIR PRODUCTS & CHEMICALS INC (APD) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its expanding profit margins, good cash flow from operations, growth in earnings per share, solid stock price performance and increase in net income. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • 35.90% is the gross profit margin for AIR PRODUCTS & CHEMICALS INC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 11.40% is above that of the industry average.
  • Net operating cash flow has significantly increased by 92.84% to $546.90 million when compared to the same quarter last year. In addition, AIR PRODUCTS & CHEMICALS INC has also vastly surpassed the industry average cash flow growth rate of 6.75%.
  • AIR PRODUCTS & CHEMICALS INC's earnings per share improvement from the most recent quarter was slightly positive. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. During the past fiscal year, AIR PRODUCTS & CHEMICALS INC increased its bottom line by earning $4.73 versus $4.66 in the prior year. This year, the market expects an improvement in earnings ($5.80 versus $4.73).
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 34.35% over the past year, a rise that has exceeded that of the S&P 500 Index. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • APD, with its decline in revenue, underperformed when compared the industry average of 13.1%. Since the same quarter one year prior, revenues slightly dropped by 0.7%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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