Why is Air Products and Chemicals (APD) up 9.6% since its last earnings report?

It has been about a month since Air Products and Chemicals (APD) last reported earnings. Shares have risen about 9.6% in that time, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Air Products and Chemicals set to decline? Before we dive into the recent reaction from investors and analysts, let’s take a quick look at the company’s most recent earnings report in order to get a better handle on the important factors influencing the situation.

Air Products’ earnings beat estimates in the second quarter

Air Products reported second-quarter fiscal 2024 (ended March 31, 2024) earnings from continuing operations of $2.57 per share, compared to $1.97 reported in the year-ago quarter. The bottom line was impacted by lower business and asset fees, favorable pricing and lower other costs, which were more than offset by reduced equity affiliate earnings, lower volumes and increased interest expense.

Excluding one-time items, adjusted earnings per share came in at $2.85, topping the Zacks Consensus Estimate of $2.72.

The company reported revenue of about $2.93 billion, down about 8% from the same period last year. This figure was below the Zacks Consensus Estimate of $3.15 billion. Although prices increased by 1%, this increase was more than offset by a 6% decrease in energy cost pass-through, which reduced sales but had no impact on net profit. Additionally, volumes decreased by 2% and unfavorable currency fluctuations resulted in a 1% decline in revenues.

The most important information in the segment

Revenues in the Americas segment declined 9% from year-ago levels to approximately $1.25 billion, below our estimate of $1.36 billion. The sales decline was primarily due to a 12% reduction in energy cost pass-through and a 1% impact from unfavorable currency, partially offset by a 3% price increase and a 1% increase in volumes.

In the Europe segment, revenues declined 11% year-over-year to $667.9 million, missing our estimate of $691.2 million. The decline was driven by a 6% decline in volumes and a 6% reduction in energy cost pass-through, as well as a 1% decline in prices. These effects were partially offset by a 2% benefit from favorable exchange rates.

Revenues in the Asia segment decreased 4% from year-ago levels to $779.7 million, lower than our estimate of $840.4 million. The decline was mainly due to a 4% impact from unfavorable currency and a 1% decline in volumes, partially offset by a 1% increase in energy cost pass-through.

The story continues

Financial

Air Products ended the quarter with cash and cash equivalents of $2.54 billion, representing sequential growth of approximately 29%. Total long-term debt increased by about 5.3% to almost $12.5 billion.

Perspectives

Air Products continues to expect fiscal 2024 adjusted earnings per share (EPS) of $12.20 to $12.50, an increase of 6% to 9% from prior year adjusted EPS. For the third quarter of fiscal 2024, the company expects adjusted EPS in the range of $3-$3.05.

Air Products expects fiscal year 2024 capital expenditures to be in the range of $5 billion to $5.5 billion.

How have estimates changed since then?

Investors have witnessed a downward trend in estimate revisions over the past month.

Due to these changes, the consensus estimate moved -8.87%.

VGM results

Meanwhile, Air Products and Chemicals has a Weak Growth Score of D, although it lags slightly behind its Momentum Score with F. Plotting a somewhat similar path, the stock is given a D on the Value side, placing it in the bottom 40% for this investment strategy.

Overall, the company’s overall VGM score is F. If you’re not focused on one strategy, this score should interest you.

Perspectives

Estimates for this company are generally on a downward trend, and the magnitude of these revisions indicates a downward shift. Notably, Air Products and Chemicals is a Zacks Rank #3 (Hold). We expect a linear rate of return on the stock over the next few months.

Industry player performance

Air Products and Chemicals is a member of the Zacks Chemical – Diversified industry. Another stock in the same industry, Eastman Chemical (EMN), has gained 3.9% over the past month. More than a month has passed since the company announced its results for the quarter ended March 2024.

In the most recent quarter, Eastman Chemical reported revenue of $2.31 billion, representing a year-over-year change of -4.2%. EPS of $1.61 in the same period compared to $1.63 a year ago.

For the current quarter, Eastman Chemical is expected to report earnings per share of $2.01, representing a +1% change from the prior-year quarter. The Zacks Consensus Estimate has remained unchanged over the past 30 days.

The overall direction and magnitude of estimate revisions translates into a Zacks Rank #3 (Hold) for Eastman Chemical. The stock also has a VGM Rating of C.

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