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Why Is Air Products (APD) Up 2% Since the Last Earnings Report?

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It has been about a month since the last earnings report for Air Products and Chemicals, Inc. (APD - Free Report) . Shares have added about 2% in that time frame, outperforming the market.

Will the recent positive trend continue leading up to the stock's next earnings release, or is it 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 catalysts.

Air Products' Q2 Earnings & Revenues Beat Estimates

Air Products beat earnings expectations in second-quarter fiscal 2017 (ended Mar 31, 2017). The company logged second-quarter adjusted earnings of $1.43 per share, up 4% from the year-ago quarter. Earnings surpassed the Zacks Consensus Estimate of $1.38.

Net income from continuing operations, as reported, was up 9% year over year to $304.4 million or $1.39 per share. Cost of sales for the reported quarter rose roughly 15.7% year over year to around $1.4 billion. Selling and administrative expenses increased 6% year over year to $177.9 million.

Revenues rose 11% year over year to $1.98 billion in the reported quarter, beating the Zacks Consensus Estimate of $1.83 billion. A 7% increase in volumes and 5% favorable energy pass-through more than offset the currency headwinds of 1% in the quarter.

Segmental Highlights

Revenues from the Industrial Gases – America segment grew 12% year over year to $890 million in the reported quarter, supported by 9% rise in energy pass-through with 1% increase in volumes, pricing and favorable currency.

Sales from the Industrial Gases – Europe, Middle East, and Africa (EMEA) segment fell 2% year over year to $414 million due to unfavorable currency adversely affecting sales by 6%, partly offset by higher energy pass-through of 3% and 1% higher volumes. Pricing remained relatively flat year over year.

Sales from the Industrial Gases – Asia segment improved 7% year over year to $436 million on the back of 8% increase in volumes. Unfavorable currency translation hurt sales by 1% whereas pricing remained flat.

Financial Position

Air Products ended second-quarter fiscal 2017 with cash and cash equivalents of $1.87 million, a nearly seven-fold year over year rise. Total long-term debt fell around 7.2% year over year to $3,300.4 million. Operating cash flow for second-quarter fiscal 2017 decreased 3.2% year over year to $861.2 million.

Business Developments

Air Products successfully completed the sale of the Performance Materials Division to Evonik Industries AG on Jan 3 for $3.8 billion in cash, subject to customary post-closing adjustments including working capital. The company incurred separation costs of $0.12 per share.

Outlook                                                                     

Air Products said that it has a significant amount of cash to invest in its core industrial gases business. The company expects to have roughly $8 billion to deploy in strategic, high-return opportunities to create shareholder value over the next three years. For fiscal 2017, Air Products expects adjusted earnings per share of $6.00 to $6.25, which at midpoint, represents a 9% increase over last year. For third-quarter fiscal 2017, Air Products anticipates adjusted earnings per share from continuing operations of $1.55 to $1.60 per share, which at midpoint, also represents a 9% increase over last year.

The company expects capital expenditures of roughly $1 billion in fiscal 2017.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last one month period as none of them issued any earnings estimate revisions.

Air Products and Chemicals, Inc. Price and Consensus

 

VGM Scores

At this time, the stock has a poor Growth Score of 'F', however its momentum is doing bit better with a 'D'. The stock was allocated a grade of 'C' on the value side, putting it in the middle 20% for this investment strategy.

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

Zacks' style scores indicate that the company's stock is solely suitable for value investors.

Outlook

The Zacks Consensus Estimate has moved slightly down over the last 30 days. Notably, the stock has a Zacks Rank #3 (Hold). We are looking for an inline return from the stock in the next few months.


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