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Why Is Air Products and Chemicals (APD) Down 3.1% 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 - Free Report) . Shares have lost about 3.1% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Air Products and Chemicals due for a breakout? 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 drivers.

Air Products Beats Q3 Earnings, Lags Revenue Estimates

Air Products recorded profit from continuing operations of $488 million or $2.20 per share in third-quarter fiscal 2019 (ended Jun 30, 2019). Also, the figure rose around 13% from $430.7 million or $1.95 in the year-ago quarter.

Barring one-time items, adjusted earnings per share (EPS) in the reported quarter were $2.17, up 11% from the year-ago quarter’s earnings of $1.95. The figure surpassed the Zacks Consensus Estimate of $2.14.

The company delivered fiscal third-quarter revenues of $2,224 million, down 1.5% year over year. Volumes and pricing rose 2% and 4%, respectively, which were roughly offset by 4% unfavorable currency, 3% from a contract modification in India and 1% lower energy cost pass-through. Revenues missed the Zacks Consensus Estimate of $2,292.5 million.

Segment Highlights

Revenues in the Industrial Gases — America segment inched up 1% year over year to $955 million. Higher pricing was partly offset by lower energy pass-through and unfavorable currency.

Sales in the Industrial Gases — Europe, Middle East, and Africa (EMEA) segment fell 12% year over year to $495 million. Strong pricing and higher 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 9% year over year to $679 million. Sales were mainly driven by higher volumes (supported by new projects, including the Lu'An gasification project) and pricing. These gains were partly offset by unfavorable currency.

Financial Position

Air Products ended the quarter with cash and cash equivalents of $2,696.8 million, down 9.7% year over year. Long-term debt was down roughly 12.6% year over year to $2,951.7 million.

Net cash from operating activities were $2,003.4 million for the first nine months of 2019, up 7.9% year over year.

Outlook

Air Products has revised its adjusted EPS guidance for fiscal 2019 to the range of $8.20-$8.25 from the previous expectation of $8.15-$8.30. This suggests more than 10% rise year over year at the midpoint.

The company expects adjusted EPS for fourth-quarter fiscal 2019 in the band of $2.26-$2.31, which indicates 13-16% rise year over year.

Also, Air Products continues to expect capital expenditure for fiscal 2019 in the range of $2.4-$2.5 billion for fiscal 2019.
 

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

VGM Scores

At this time, Air Products and Chemicals has a nice Growth Score of B, a grade with the same score on the momentum front. 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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