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Air Products (APD) Q4 Earnings Beat Estimates, Sales Trail

Air Products and Chemicals, Inc.APD surpassed earnings expectations in fourth-quarter fiscal 2016 (ended Sep 30, 2016).

The industrial gases giant logged fourth-quarter adjusted earnings of $2.01 per share, up 10% from the year-ago quarter, thereby marking the ninth consecutive quarter of double-digit growth. Earnings also beat the Zacks Consensus Estimate of $1.99. Adjusted earnings exclude one-time items including charges associated with business separation and restructuring actions.

Net income from continuing operations, as reported, was up 16% year over year to $402 million or $1.84 per share. Cost of sales for the reported quarter declined roughly 2.9% year over year to around $1.65 billion. However, selling and administrative expenses increased 9.5% year over year to $218.8 million.

Revenues rose roughly 0.6% year over year to $2,463 million in the reported quarter but missed the Zacks Consensus Estimate of $2,481 million. A 3% increase in volumes, mainly driven by the Jazan project, more than offset currency headwinds and lower energy pass-through of 1% each in the quarter.

FY16 Highlights

Revenues for fiscal 2016 fell roughly 3.7% year over year to $9,524.4 million, as a 2% rise in volumes was more than offset by currency headwinds and lower energy pass-through of 3% each, in the year.

Adjusted earnings for fiscal 2016 were $7.55 per share, up 14% year over year. Earnings met the upper end of the company's guidance range of $7.45-$7.55 per share.

Segmental Highlights

Revenues from the Industrial Gases - America segment dropped 3% year over year to $877 million in the reported quarter, hurt by 10% lower volumes in Latin America, decreasing overall America's volumes by 2%. Energy pass-through, pricing and currency were relatively flat year over year.

Sales from the Industrial Gases - Europe, Middle East, and Africa ("EMEA") segment fell 10% year over year to $414 million due to lower volumes adversely affecting sales by 4% and unfavorable currency impact and lower energy pass-through reducing sales by 3%. Pricing remained relatively flat year over year.

Sales from the Industrial Gases - Asia segment rose 5% year over year to $449 million on the back of a 7% increase in volumes from new plants as well as the underlying base businesses. Unfavorable currency translation hurt sales by 2%.

Sales from the Industrial Gases - Global segment increased $68 million from the fourth quarter of 2015 to $157 million.

Revenues from the Materials Technologies segment improved 5% year over year to $515 million on 7% higher volumes, partly hit by 2% lower pricing. Sales of Electronics Materials increased 7% on higher volumes, driven by Advanced Materials and Delivery Systems. Performance Materials' sales went up 4% year over year as 8% higher volumes were offset by 4% lower pricing resulting from lower raw material costs.

Financial Position

Air Products ended fiscal 2016 with cash and cash equivalents of $1,501.3 million, up roughly 614.3% year over year. Total long-term debt rose around 20.6% year over year to $5289.4 million. Operating cash flow for fiscal 2016 increased 10.7% year over year to $2,707.4 million.

Business Developments

Air Products successfully completed the spin-off of its Electronic Materials Division as Versum Materials on Oct 1, 2016. From the beginning of fiscal 2017, the results of the division will be presented as discounted operations.

Air Products is making progress in relation to the sale of its Performance Materials Division.

Outlook

Excluding Electronic Materials and Performance Materials businesses, Air Products expects adjusted earnings from continuing operations for first-quarter fiscal 2017 to be in the range of $1.40-$1.50 per share, up 3%−10% from the comparable year-ago period. The company expects adjusted earnings for fiscal 2017 to be in the band of $6.25-$6.50 per share, up 9%−13% year over year.

Excluding Electronic Materials and including Performance Materials, Air Products sees first-quarter fiscal 2017 adjusted earnings from continuing operations in the band of $1.60-$1.70 per share, up 7%-13% year over year. The company expects adjusted earnings for fiscal 2017 to be in the range of $7.10-$7.35 per share, up 9%-13% year over year.

The company expects capital expenditures of roughly $1.2 billion in fiscal 2017.

AIR PRODS & CHE Price, Consensus and EPS Surprise

AIR PRODS & CHE Price, Consensus and EPS Surprise | AIR PRODS & CHE Quote

Zacks Rank

Air Products currently carries a Zacks Rank #5 (Strong Sell).

Some better-ranked companies in the basic materials space include Koppers Holdings Inc. KOP , The Chemours Company CC and LyondellBasell Industries N.V. LYB .

Koppers Holdings sports a Zacks Rank #1 (Strong Buy) and has an expected long-term growth of 10%.

Chemours, with an expected long-term growth of 15.5%, sports a Zacks Rank #1. You can see the complete list of today's Zacks #1 Rank stocks here .

LyondellBasell, a Zacks Rank #2 (Buy) stock, has an expected long-term growth of 8%.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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