Air Products' (APD) Q2 Earnings & Revenues Beat Estimates

Air Products and Chemicals, Inc. APD beat earnings expectations in second-quarter fiscal 2017 (ended Mar 31, 2017).

The industrial gases giant logged second-quarter adjusted earnings of $1.43 per share, up 4% from the year-ago quarter. Earnings surpassed the Zacks Consensus Estimate of $1.38.

Net income from continuing operations, as reported, was up 9% year over year to $304.4 million or $1.39 per share. Cost of sales for the reported quarter rose roughly 15.7% year over year to around $1.4 billion. Selling and administrative expenses increased 6% year over year to $177.9 million.

Revenues rose 11% year over year to $1.98 billion in the reported quarter, beating the Zacks Consensus Estimate of $1.83 billion. A 7% increase in volumes and 5% favorable energy pass-through more than offset the currency headwinds of 1% in the quarter.

Air Products and Chemicals, Inc. Price, Consensus and EPS Surprise

 

Air Products and Chemicals, Inc. Price, Consensus and EPS Surprise | Air Products and Chemicals, Inc. Quote

Segmental Highlights

Revenues from the Industrial Gases – America segment grew 12% year over year to $890 million in the reported quarter, supported by 9% rise in energy pass-through with 1% increase in volumes, pricing and favorable currency.

Sales from the Industrial Gases – Europe, Middle East, and Africa (EMEA) segment fell 2% year over year to $414 million due to unfavorable currency adversely affecting sales by 6%, partly offset by higher energy pass-through of 3% and 1% higher volumes. Pricing remained relatively flat year over year.

Sales from the Industrial Gases – Asia segment improved 7% year over year to $436 million on the back of 8% increase in volumes. Unfavorable currency translation hurt sales by 1% whereas pricing remained flat.

Financial Position

Air Products ended second-quarter fiscal 2017 with cash and cash equivalents of $1.87 million, a nearly seven-fold year over year rise. Total long-term debt fell around 7.2% year over year to $3,300.4 million. Operating cash flow for second-quarter fiscal 2017 decreased 3.2% year over year to $861.2 million.

Business Developments

Air Products successfully completed the sale of the Performance Materials Division to Evonik Industries AG on Jan 3 for $3.8 billion in cash, subject to customary post-closing adjustments including working capital. The company incurred separation costs of 12 cents per share.

Outlook                                                                     

Air Products said that it has a significant amount of cash to invest in its core industrial gases business. The company expects to have roughly $8 billion to deploy in strategic, high-return opportunities to create shareholder value over the next three years. For fiscal 2017, Air Products expects adjusted earnings per share of $6.00 to $6.25, which at midpoint, represents a 9% increase over last year. For third-quarter fiscal 2017, Air Products anticipates adjusted earnings per share from continuing operations of $1.55 to $1.60 per share, which at midpoint, also represents a 9% increase over last year.

The company expects capital expenditures of roughly $1 billion in fiscal 2017.

Price Performance

Air Products’ shares rallied 6.1% in the past six months, underperforming the Zacks categorized Chemicals-Diversified industry’s gain of 18%.

Zacks Rank & Other Stocks to Consider

Air Products currently carries a Zacks Rank #2 (Buy).

Other well-placed companies in the basic material space include Univar Inc. UNVR, The Chemours Company CC and Kronos Worldwide Inc KRO. All the three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Univar has expected long-term growth of 9.4%.

Chemours has expected long-term growth of 15.5%.

Kronos has expected long-term growth of 5%.

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