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Air Products Beat Revenue Estimates But Misses on Earnings

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Air Products and Chemicals, which engages in the production, sale, and distribution of industrial gases worldwide, reported lower-than-expected earnings in the fiscal second quarter but beat revenue estimates due to higher energy cost, favorable currency, and higher pricing.

The Allentown, Pennsylvania-based company reported adjusted earnings per share (EPS) of $2.08, missing the Wall Street consensus estimates of $2.13 per share. But the industrial gases giant said its revenue rose about 13% year over year to $2.5 billion, beating the market expectations of $2.3 billion.

The company, which designs, engineers, and builds equipment that produces industrial gases, forecast full-year fiscal 2021 adjusted EPS guidance of $8.95 to $9.10, up 7% to 9% over prior year adjusted EPS. For the fiscal 2021 third quarter, Air Products’ adjusted EPS guidance is $2.30 to $2.40, up 14% to 19% over fiscal 2020 third-quarter adjusted EPS.

Air Products and Chemicals shares ended 2.45% higher at $300.74 on Tuesday. The stock rose over 10% so far this year.

Analyst Comments

Air Products and Chemicals (APD) only modestly o/p after a positive guidance update that should drive upward revisions and announcing stalled projects, Jazan and Lu’An, were back on track. We think commentary around updated terms for Lu’An may have been poorly received, however, we view the facility restart and confidence in a Jazan close by FY end as important positives. We reiterate our Outperform rating,” noted Marc Bianchi, equity analyst at Cowen.

“We continue to like APD’s ambitious capital deployment strategy into an industry offering significant growth in the base business with upside from Energy Transition investments. On the back of our higher estimates, we boost our DCF-based target from $340 to $360 which assumes a 6.5% WACC.”

Air Products Stock Price Forecast

Nine analysts who offered stock ratings for Air Products and Chemicals in the last three months forecast the average price in 12 months of $321.89 with a high forecast of $360.00 and a low forecast of $295.00.

The average price target represents a 7.03% increase from the last price of $300.74. Of those nine analysts, six rated “Buy”, three rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley raised the base target price to $335 from $300 with a high of $450 under a bull scenario and $225 under the worst-case scenario. The firm gave an “Overweight” rating on the industrial gases company’s stock.

Several other analysts have also updated their stock outlook. Deutsche Bank raised the stock price forecast to $340 from $300. Cowen and company lifted the target price to $360 from $340. Citigroup upped the price target to $319 from $315. JP Morgan increased the target price to $304 from $280.

“We are raising our fair value estimate for narrow-moat-rated Air Products after the industrial gas firm reported its fiscal second-quarter results. We were encouraged to hear positive updates on the status of two large gasification projects: (1) Lu’An has asked Air Products to restart the facility; and (2) Air Products is now optimistic that the Jazan transaction will close during fiscal 2021,” noted Krzysztof Smalec, equity analyst at Morningstar.

“After updating our estimates, we are bumping our fair value estimate for Air Products to $317 from $297. Earlier this year, we saw the name as undervalued as market sentiment turned around against the company due to question marks around Lu’Anand Jazan, but the stock is now back in 3-star territory.”

Check out FX Empire’s earnings calendar

This article was originally posted on FX Empire