Analyzing Air Products and Chemicals (APD) and Praxair (PX)

Praxair (NYSE: PX) and Air Products and Chemicals (NYSE:APD) are both large-cap basic materials companies, but which is the better investment? We will compare the two businesses based on the strength of their earnings, risk, dividends, valuation, institutional ownership, profitabiliy and analyst recommendations.

Insider and Institutional Ownership

85.9% of Praxair shares are held by institutional investors. Comparatively, 89.6% of Air Products and Chemicals shares are held by institutional investors. 0.2% of Praxair shares are held by insiders. Comparatively, 0.4% of Air Products and Chemicals shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Analyst Ratings

This is a summary of current ratings and target prices for Praxair and Air Products and Chemicals, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Praxair 2 10 3 0 2.07
Air Products and Chemicals 1 4 8 0 2.54

Praxair currently has a consensus price target of $131.00, suggesting a potential downside of 4.00%. Air Products and Chemicals has a consensus price target of $153.85, suggesting a potential upside of 5.27%. Given Air Products and Chemicals’ stronger consensus rating and higher probable upside, analysts plainly believe Air Products and Chemicals is more favorable than Praxair.

Earnings and Valuation

This table compares Praxair and Air Products and Chemicals’ top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Praxair $10.75 billion 3.62 $3.50 billion $5.33 25.60
Air Products and Chemicals $9.74 billion 3.27 $3.14 billion $14.46 10.11

Praxair has higher revenue and earnings than Air Products and Chemicals. Air Products and Chemicals is trading at a lower price-to-earnings ratio than Praxair, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Praxair and Air Products and Chemicals’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Praxair 14.26% 28.42% 8.16%
Air Products and Chemicals 36.19% 19.26% 8.68%

Volatility and Risk

Praxair has a beta of 0.94, meaning that its stock price is 6% less volatile than the S&P 500. Comparatively, Air Products and Chemicals has a beta of 1.25, meaning that its stock price is 25% more volatile than the S&P 500.

Dividends

Praxair pays an annual dividend of $3.15 per share and has a dividend yield of 2.3%. Air Products and Chemicals pays an annual dividend of $3.80 per share and has a dividend yield of 2.6%. Praxair pays out 59.1% of its earnings in the form of a dividend. Air Products and Chemicals pays out 26.3% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Praxair has raised its dividend for 12 consecutive years and Air Products and Chemicals has raised its dividend for 34 consecutive years. Air Products and Chemicals is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

Air Products and Chemicals beats Praxair on 12 of the 17 factors compared between the two stocks.

About Praxair

Praxair, Inc. is an industrial gas company. The Company’s operations are organized into five segments, four of which have been determined on a geographic basis of segmentation: North America, Europe, South America and Asia. In addition, it operates its surface technologies business through its subsidiary, Praxair Surface Technologies, Inc., which represents the fifth segment. Its operations consist of two product lines: industrial gases and surface technologies. Its industrial gases product line centers on the manufacturing and distribution of atmospheric gases (oxygen, nitrogen, argon, rare gases) and process gases (carbon dioxide, helium, hydrogen, electronic gases, specialty gases). It also designs, engineers and builds equipment that produces industrial gases primarily for internal use. Its Surface Technologies segment, operated through Praxair Surface Technologies, Inc., supplies wear-resistant and high-temperature corrosion-resistant metallic and ceramic coatings and powders.

About Air Products and Chemicals

Air Products and Chemicals, Inc. is an industrial gases company. The Company’s Industrial Gases business provides atmospheric and process gases and related equipment to manufacturing markets, including refining and petrochemical, metals, electronics, and food and beverage. The Company operates through seven segments: Industrial Gases-Americas, Industrial Gases-Europe, Middle East, and Africa (EMEA), Industrial Gases-Asia, Industrial Gases-Global, Materials Technologies, Energy-from-Waste, and Corporate and other. The Company is also a supplier of liquefied natural gas process technology and equipment. The Company’s Materials Technologies business serves the semiconductor, polyurethanes, cleaning and coatings, and adhesives industries. The Company manufactures and distributes products in two lines of business: Industrial Gases and Materials Technologies.

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