Air Products (APD) to Post Q1 Earnings: What's in the Cards?

Zacks Equity Research

Air Products and Chemicals, Inc. APD is slated to release first-quarter fiscal 2020 results ahead of the bell on Jan 24. The company is likely to have gained from higher volumes, pricing and productivity initiatives in the fiscal first quarter.

The industrial gases giant reported a negative earnings surprise of 0.9% in the last reported quarter. Sales also missed expectations as higher volumes and prices were offset by unfavorable currency swings and the impacts of contract modification in India and lower energy cost pass-through.

The company’s shares have rallied 50.3% in the past year against the industry’s 21.9% decline.



 

Let’s see how things are shaping up for this announcement.

What do the Estimates Say?

Air Products expects adjusted earnings per share for first-quarter fiscal 2020 in the band of $2.05-$2.10, which indicates 10-13% rise year over year.

The Zacks Consensus Estimate for Air Products’ fiscal first-quarter revenues is currently pegged at $2,241 million, suggesting a rise of 0.8% year over year.

The Zacks Consensus Estimate for revenues for the Industrial Gases — Americas segment is currently pegged at $997 million, calling for an increase of 0.8% year over year. The consensus mark for the segment’s operating income stands at $234 million, indicating growth of 6.8% year over year.

The Zacks Consensus Estimate for revenues in the Industrial Gases — Asia segment is pegged at $713 million, which suggests 13.7% year-over-year growth. Operating income in the segment is projected at $231 million, reflecting year-over-year increase of 14.4%.

The Zacks Consensus Estimate for revenues in the Industrial Gases — EMEA segment is at $525 million, essentially flat year over year. The Zacks Consensus Estimate for operating income is pegged at $118 million, which indicates a rise of 11.3% year over year.

The consensus mark for revenues for the Industrial Gases — Global segment is pegged at $65 million, which indicates a decline of 4.4% year over year. The same for the segment’s operating income is at a loss of $2.17 million, compared to a profit of $3.9 million a year ago.

Few Factors at Play

Air Products’ investments in high-return projects, business deals and acquisitions are expected to get reflected in fiscal first-quarter results. The company is also committed to boost productivity to improve cost structure. It is seeing positive impact of its productivity actions. Benefits from additional productivity and cost improvement programs are likely to have supported margins in the to-be-reported quarter.

Moreover, new projects are likely to have driven volumes in the quarter to be reported. The Lu'An syngas project in China is likely to have contributed to volume growth in the Industrial Gases – Asia segment. Air Products also has been benefiting from higher pricing over the past several quarters and the same is expected to have continued in the fiscal first quarter and supported its sales and margins.  

However, the company is exposed to headwind from unfavorable currency movements, which had a negative impact on sales and earnings in the last reported quarter stemming from weaker foreign currencies. The unfavorable impact of currency is likely to have continued in the fiscal first quarter. Moreover, the impacts of economic weakness in South America and the civil unrest in that region are expected to get reflected on volumes in the Industrial Gases — Americas segment.

Air Products and Chemicals, Inc. Price and EPS Surprise

 

Air Products and Chemicals, Inc. Price and EPS Surprise

Air Products and Chemicals, Inc. price-eps-surprise | Air Products and Chemicals, Inc. Quote

What the Zacks Model Says

Our proven model doesn’t conclusively predict an earnings beat for Air Products this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. But that’s not the case here.

Earnings ESP: Earnings ESP for Air Products is -0.08%. The Zacks Consensus Estimate for the fiscal first quarter currently stands at $2.08. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Air Products currently carries a Zacks Rank #3.  

Stocks Poised to Beat Estimates

Here are some companies in the basic materials space you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:

Steel Dynamics, Inc. STLD, scheduled to release earnings on Jan 22, has an Earnings ESP of +4.61% and carries a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Royal Gold, Inc. RGLD, scheduled to release earnings on Feb 5, has an Earnings ESP of +1.01% and carries a Zacks Rank #1.

Cleveland-Cliffs Inc. CLF, scheduled to release earnings on Feb 27, has an Earnings ESP of +6.25% and carries a Zacks Rank #2.

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