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Why Is Air Products and Chemicals (APD) Up 15.1% Since Last Earnings Report?

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It has been about a month since the last earnings report for Air Products and Chemicals (APD). Shares have added about 15.1% 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 its most recent earnings report in order to get a better handle on the important drivers.

Air Products’ Earnings & Revenues Trail Estimates in Q1

Air Products logged profit from continuing operations of $347.5 million or $1.57 per share for first-quarter fiscal 2019 (ended Dec 31, 2018), a more than two-fold jump from $155.6 million or 70 cents a year ago.

Barring one-time items, adjusted earnings for the reported quarter were $1.86 per share, up 4% from the year-ago quarter earnings of $1.79 per share. However, it trailed the Zacks Consensus Estimate of $1.87.

The company reported fiscal first-quarter revenues of $2,224 million, flat year over year as 1% higher pricing and 5% favorable energy pass-through were offset by 3% lower volumes and 2% unfavorable currency impact. Sales also missed the Zacks Consensus Estimate of $2,289 million.

Segment Highlights

Revenues from the Industrial Gases — America segment went up 9% year over year to $989 million in the reported quarter, supported by higher volumes and pricing as well as higher energy pass-through, partly offset by unfavorable currency. Merchant gases volumes were favorable.

Sales from the Industrial Gases —  EMEA segment rose 2% year over year to $524 million driven by favorable energy pass-through and positive volumes and pricing, partly masked by unfavorable currency.

Sales from the Industrial Gases — Asia segment fell 3% year over year to $627 million. Barring the impact of a plant sale in the prior-year quarter, sales rose 16% on the back of contributions of the Lu'An gasification project.

Financial Position

Air Products ended the quarter with cash and cash equivalents of $2,923.3 million, up 7% year over year. Long-term debt was down roughly 13% year over year to $2,954.4 million.

The company also raised its quarterly dividend by more than 5% to $1.16 per share, marking the 37th straight year of dividend hike.

Outlook
        
Air Products continues to expect adjusted earnings for fiscal 2019 to be in the range of $8.05 to $8.30 per share, reflecting a 10% increase at the midpoint year over year. The company expects adjusted earnings to be in the band of $1.80 to $1.90 per share for second-quarter fiscal 2019, up 8% at the midpoint year over year. The company also continues to anticipates capital expenditure of $2.3-$2.5 billion for fiscal 2019.
 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

Currently, Air Products and Chemicals has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. 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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