Air Products and Chemicals, Inc. APD is slated to release second-quarter fiscal 2020 results ahead of the bell on Apr 23. The company is likely to have gained from new projects and productivity initiatives in the quarter. However, the impacts of higher maintenance spending are expected to get reflected on its results.
The industrial gases giant delivered a positive earnings surprise of around 2.9% in the last reported quarter. Sales also beat expectations as higher volumes and prices more than offset unfavorable currency swings and the impacts of contract modification in India and lower energy cost pass-through.
The company’s shares have gained 9% in the past year against the industry’s 38.3% decline.
Let’s see how things are shaping up for this announcement.
What do the Estimates Say?
Air Products expects adjusted earnings per share for the fiscal second quarter in the band of $2.10-$2.20, which indicates a 9-15% rise year over year.
The Zacks Consensus Estimate for Air Products’ fiscal second quarter revenues is currently pegged at $2,143 million, suggesting a decline of 2.1% year over year.
The Zacks Consensus Estimate for revenues for the Industrial Gases — Americas segment is currently pegged at $935 million, calling for a decline of 5.7% year over year. The consensus mark for the segment’s operating income stands at $257 million, essentially flat year over year.
The Zacks Consensus Estimate for revenues in the Industrial Gases — Asia segment is pegged at $667 million, which suggests 6.7% year-over-year growth. The consensus mark for operating income for the segment is projected at $218 million, reflecting a year-over-year increase of 9%.
The Zacks Consensus Estimate for revenues in the Industrial Gases — EMEA segment stands at $498 million, indicating a 0.8% year-over-year rise. The Zacks Consensus Estimate for operating income is pegged at $124 million, flat year over year.
The consensus mark for revenues for the Industrial Gases — Global segment is pegged at $61 million, which indicates a rise of 13% year over year. The same for the segment’s operating income stands at a loss of $0.67 million.
Some Factors at Play
Air Products’ productivity actions, investments in high-return projects and benefits of acquisitions are expected to get reflected on fiscal second-quarter results. New projects are likely to have contributed to its volume growth.
The company remains committed to boost productivity to improve cost structure. It is seeing a positive impact of its productivity actions. Benefits from additional productivity and cost improvement programs are likely to have supported margins in the to-be-reported quarter.
Air Products also has been benefiting from higher pricing over the past several quarters and the same is expected to have continued in the fiscal second quarter.
However, the company is likely to have faced headwinds from higher maintenance spending in the fiscal second quarter, stemming from life extension work on certain facilities. Higher costs are likely to have affected margins in its Industrial Gases — Americas segment.
Moreover, the company’s Industrial Gases — Asia segment is likely to have faced some headwinds in the fiscal second quarter from the Chinese Lunar New Year holiday which was extended by Beijing to contain the outbreak of coronavirus. The impacts of slowdown due to the Chinese New Year are expected to get reflected on sales and margins in Air Products’ Asia business.
Air Products and Chemicals, Inc. Price and EPS Surprise
Air Products and Chemicals, Inc. price-eps-surprise | Air Products and Chemicals, Inc. Quote
What the Zacks Model Says
Our proven model doesn’t conclusively predict an earnings beat for Air Products this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. But that’s not the case here.
Earnings ESP: Earnings ESP for Air Products is -4.83%. The Zacks Consensus Estimate for the fiscal second quarter currently stands at $2.07. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Air Products currently carries a Zacks Rank #4 (Sell).
Stocks Poised to Beat Estimates
Here are some companies in the basic materials space you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:
Verso Corporation VRS, expected to release earnings on May 13, has an Earnings ESP of +20% and carries a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Barrick Gold Corporation GOLD, scheduled to release earnings on May 6, has an Earnings ESP of +2.42% and carries a Zacks Rank #2.
Pretium Resources Inc. PVG, expected to release earnings on May 7, has an Earnings ESP of +25.81% and carries a Zacks Rank #2.
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