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Air Products and Chemicals (APD) Up 7.5% Since Last Earnings Report: Can It Continue?

Zacks Equity Research

A month has gone by since the last earnings report for Air Products and Chemicals (APD). Shares have added about 7.5% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Air Products and Chemicals due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Air Products' Earnings and Sales Top Estimates in Q1

Air Products logged earnings from continuing operations of $2.14 per share in first-quarter fiscal 2020 (ended Dec 31, 2019), up 36% from $1.57 recorded in the year-ago quarter. Earnings topped the Zacks Consensus Estimate of $2.08.

The bottom line in the reported quarter was driven by higher volumes and pricing across all regions.

The company delivered fiscal first-quarter revenues of $2,254.7 million, up 1% year over year. It also beat the Zacks Consensus Estimate of $2,240.7 million.

Volumes rose 6% while pricing increased 3%. These were offset by 1% unfavorable currency, 2% from a contract modification in India and 5% lower energy pass-through.

Volume gains were supported by base business growth, new plants, acquisitions and a short-term contract in Asia.

Segment Highlights

Revenues in the Industrial Gases — America segment fell 5% year over year to $936 million. Higher pricing and volumes were more than offset by lower energy pass-through and unfavorable currency.

Sales in the Industrial Gases — EMEA segment dropped 5% year over year to $499 million. Higher pricing and volumes were offset by unfavorable currency, decline from the India contract modification and lower energy pass-through.

Sales in the Industrial Gases — Asia segment rose 11% year over year to $693 million. The upside was driven by higher volumes (supported by new plants) and pricing. These were partly offset by unfavorable currency.

Financials

Air Products ended the quarter with cash and cash equivalents of $2,406.1 million, down around 18% year over year. Long-term debt was down roughly 1% year over year to $2,937 million.

Net cash from operating activities were $667 million for the quarter, up around 2% year over year.

Outlook

Air Products continues to expect adjusted earnings for fiscal 2020 in the range $9.35-$9.60 per share, which calls for a 14-17% rise year over year.

The company expects adjusted earnings to be in the band of $2.10 to $2.20 per share for second-quarter fiscal 2020, up 9 year over year.

Air Products also expects capital expenditure for fiscal 2020 in the range of $4-$4.5 billion.
 

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -5.09% due to these changes.

VGM Scores

Currently, Air Products and Chemicals has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Air Products and Chemicals has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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