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Air Products' (APD) Q4 Earnings Top, Profit Shoots Up

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Air Products APD topped earnings expectations in fourth-quarter fiscal 2015 (ended Sep 30, 2015) and saw a healthy jump in its profits, helped by its cost-management initiatives and improved pricing. But its sales fell year over year and trailed expectations.

The industrial gases giant logged fourth-quarter adjusted earnings of $1.82 per share, up from $1.66 per share recorded in the year-ago quarter. Earnings also beat the Zacks Consensus Estimate of $1.80. Adjusted earnings exclude one-time items, including charges associated with business restructuring and cost-saving actions.

Net income from continuing operations, as reported, rocketed more than three-fold year over year to $345 million or $1.58 per share. The bottom line was supported by lower costs. Cost of sales for the reported quarter fell roughly 12% year over year to around $1.7 billion. Selling & administrative and R&D expenses also fell year over year.

For fiscal 2015, adjusted earnings of $6.57 per share beat the Zacks Consensus Estimate of $6.55.

Revenues slipped roughly 9% year over year to $2,449 million in the reported quarter and missed the Zacks Consensus Estimate of $2,561 million. The top line was hit by currency headwinds and lower energy pass-through. Currency translation had a 7% unfavorable impact on fourth-quarter sales.

For fiscal 2015, revenues fell 5% year over year to around $9,895 million, missing the Zacks Consensus Estimate of $10,004 million.  
 

Air Products and Chemicals Inc. (APD) - Earnings Surprise | FindTheCompany

 

Segmental Highlights

Revenues from the Industrial Gases - America segment went down 13% year over year to $902 million in the reported quarter, hurt by lower energy pass-through and unfavorable currency impact. However, underlying sales remained flat year over year as higher pricing was offset by lower volumes.

Sales from the Industrial Gases - Europe, Middle East, and Africa (“EMEA”) segment fell 12% year over year to $460 million due to unfavorable currency impact. Underlying sales were up 2%.

Sales from the Industrial Gases - Asia segment rose 7% year over year to $428 million on the back of a 15% increase in volumes, mainly from new plants. Unfavorable currency translation hurt sales by 7%.

Revenues from the Materials Technologies segment slipped 13% year over year to $490 million as higher pricing was more than offset by lower volumes and unfavorable currency impact. Underlying sales of Electronics Materials fell 9% on lower delivery systems. Performance Materials’ sales dropped 8% year over year due to lower volumes.

Financial Position

Air Products ended fiscal 2015 with cash and cash equivalents of $206.4 million, down roughly 39% year over year. Total long-term debt fell around 18% year over year to $3,949.1 million. Operating cash flow for fiscal 2015 rose 11% year over year to $2,437.8 million.

Outlook

Air Products expects earnings from continuing operations for first-quarter fiscal 2016 to be in the range of $1.65 to $1.75 per share. For fiscal 2016, the company anticipates earnings from continuing operations in the band of $7.25 to $7.50 per share, a 10%-14% year over year rise.

Air Products also sees capital expenditures for fiscal 2016 in the range of $1.5−$1.6 billion.

Air Products, in Sep 2015, announced its plans to separate its Materials Technologies unit through a tax-free spin-off (expected to be complete before Sep 2016).

Following the spin-off, both Air Products and the Materials Technologies businesses will operate as two best-in-class public companies with separate business models The spin-off will enable Air Products to become the safest and most profitable industrial gas company in the world, providing outstanding service to its customers. Also, it will allow the company to focus entirely on specialty materials.

Air Products currently carries a Zacks Rank #3 (Hold).

Better-ranked companies in the chemical space include Celanese Corp. CE, Orion Engineered Carbons SA OEC and Stepan Co. SCL, all carrying a  Zacks Rank #1 (Strong Buy).

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