Earnings Update: Here's Why Analysts Just Lifted Their Air Products and Chemicals, Inc. (NYSE:APD) Price Target To US$285
As you might know, Air Products and Chemicals, Inc. (NYSE:APD) recently reported its third-quarter numbers. The result was positive overall - although revenues of US$2.1b were in line with what the analysts predicted, Air Products and Chemicals surprised by delivering a statutory profit of US$2.01 per share, modestly greater than expected. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
View our latest analysis for Air Products and Chemicals
Following the latest results, Air Products and Chemicals' 22 analysts are now forecasting revenues of US$9.54b in 2021. This would be a decent 8.2% improvement in sales compared to the last 12 months. Statutory earnings per share are predicted to ascend 14% to US$9.88. In the lead-up to this report, the analysts had been modelling revenues of US$9.49b and earnings per share (EPS) of US$9.92 in 2021. So it's pretty clear that, although the analysts have updated their estimates, there's been no major change in expectations for the business following the latest results.
With the analysts reconfirming their revenue and earnings forecasts, it's surprising to see that the price target rose 7.1% to US$285. It looks as though they previously had some doubts over whether the business would live up to their expectations. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic Air Products and Chemicals analyst has a price target of US$359 per share, while the most pessimistic values it at US$215. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
Of course, another way to look at these forecasts is to place them into context against the industry itself. The analysts are definitely expecting Air Products and Chemicals' growth to accelerate, with the forecast 8.2% growth ranking favourably alongside historical growth of 1.4% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 5.3% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Air Products and Chemicals to grow faster than the wider industry.
The Bottom Line
The most obvious conclusion is that there's been no major change in the business' prospects in recent times, with the analysts holding their earnings forecasts steady, in line with previous estimates. Fortunately, they also reconfirmed their revenue numbers, suggesting sales are tracking in line with expectations - and our data suggests that revenues are expected to grow faster than the wider industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for Air Products and Chemicals going out to 2024, and you can see them free on our platform here.
And what about risks? Every company has them, and we've spotted 2 warning signs for Air Products and Chemicals you should know about.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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