What happened
Bouncing back from their 2.5% drop in 2018, shares of Air Products & Chemicals (APD -0.28%) rose 47% in 2019, according to data from S&P Global Market Intelligence. A strong fourth-quarter 2019 earnings report, management's auspicious outlook for 2020, an update to the company's dividend policy, and a positive nod from Wall Street all helped to catapult shares higher throughout the year.
So what
While the gift-giving season had wrapped up for most people weeks earlier, Air Products, a provider of industrial gases, extended the holiday spirit into the new year and offered investors a present in the form of a 5% increase of its quarterly dividend, to $1.16 per share. A Dividend Aristocrat, Air Products has raised its quarterly dividend for 37 consecutive years.
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Investors stayed in a spirit of good cheer as the company announced a relatively strong start to its fiscal 2019 year. While sales in Q1 2019 were flat compared to the same period in 2018, Air Products reported earnings per share (EPS) of $1.57 -- a 124% increase over the $0.70 that it reported for Q1 2018. It wasn't only the income statement, which featured a year-over-year improvement; Air Products reported Q1 2019 operating cash flow of $655 million, for a 17% increase over the prior-year period.
Whereas the dividend raise and Q1 2019 results propelled the stock higher in the first month of the year, a continuous wave of bullish sentiment repeatedly helped propel the stock throughout 2019. For example: In March, Chris Parkinson, an analyst with Credit Suisse, reiterated an outperform rating on the stock and raised his price target to $200 from $188. Becoming more optimistic throughout the year, Parkinson proceeded to raise his price target to $222 in April and to $238 in July. Barclays also expressed a bullish take on the stock, raising its price target to $220 from $184 in April and then to $260 in July. More recently, in November, Deutsche Bank raised its price target to $260 from $250 while reiterating a buy rating, according to TheFly.com.
Ending the fiscal year much as it began, Air Products reported a strong Q4 performance, to the delight of investors: EPS jumped to $7.94 for 2019 -- a 20% increase over 2018 -- and 2019 operating cash flow rose to $2.97 billion from $2.55 billion in 2018.
But it wasn't only the company's previous performance which motivated investors to pick up shares. Management expects Air Products' bottom line will rise even more in 2020, issuing adjusted EPS guidance of $9.35 to $9.60 per share, up 14% to 17% over 2019.
Now what
In the coming weeks, look for the company to extend its streak of consecutive dividend raises to 38 years. And in the coming quarters, watch how well Air Products fares in meeting management's profitability forecast for 2020. Besides keeping an eye on the financials, look for the announcements of major deals (like the company's recent investment in hydrogen production) that may portend bottom-line growth over the long term.
