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Air Products (APD) to Report Q4 Earnings: What's in Store?

Air Products & Chemicals Inc.APD is set to release fourth-quarter fiscal 2015 results ahead of the bell on Oct 29.

Last quarter, the industrial gases giant had delivered a positive earnings surprise of 4.43%. Air Products has beaten the Zacks Consensus Estimate in the trailing four quarters with an average beat of 2.90%. Let's see how things are shaping up for this announcement.

Factors to Consider

Air Products' third-quarter fiscal 2015 adjusted earnings topped the Zacks Consensus Estimate while sales matched expectations. The company saw lower sales in the quarter, partly due to unfavorable currency swings.

Air Products, in its fiscal third-quarter earnings call, said that it expects earnings from continuing operations for fourth-quarter fiscal 2015 to be in the range of $1.75-$1.85 per share. For fiscal 2015, the company raised its outlook for earnings from continuing operations to $6.50-$6.60 per share from $6.35-$6.55 per share projected earlier.

Air Products is well positioned to capitalize on the cyclical recovery in its core industrial end-markets. The company has built a $3.2 billion project backlog. These projects are expected to be accretive to earnings and cash flow as they come on stream over the next few years.

Acquisitions and new business wins are expected to continue to drive the company's results. The acquisition of a 67% stake in Chilean industrial gas company, Indura S.A. (South America's biggest independent industrial gas company with annual sales of $478 million) has ushered in substantial growth opportunity for Air Products, placing it as Latin America's second largest industrial gas producer. The acquisition opened up a $1.5 billion opportunity in Latin America, the second-highest growth region in the world following Asia. Moreover, the acquisition of EPCO is an excellent fit for Air Products and will help it expand its market share by offering an extended product portfolio to existing and new customers. It will also provide cost and revenue synergies to Air Products.

However, Air Products' industrial gases business in the Europe, Middle East, and Africa ("EMEA") region is under pressure due to a weak operating environment. Moreover, the company has a debt-laden balance sheet.

Air Products generates a considerable amount of revenues outside the U.S., and therefore, is exposed to foreign exchange fluctuations. The company faced an 11 cents per share earnings headwind associated with unfavorable currency swings (stemming from the weakening of most currencies against dollar) in the fiscal third quarter. It expects unfavorable currency impact of around 35 cents per share for fiscal 2015.

Earnings Whispers

Our proven model does not conclusively show that Air Products will beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Ranks #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Negative Zacks ESP: The Earnings ESP for Air Products is -1.67% as the Most Accurate estimate is currently at $1.77 while the Zacks Consensus Estimate is pegged at $1.80.

Zacks Rank: Air Products currently carries a Zacks Rank #3 (Hold), which when combined with a negative ESP, makes surprise prediction difficult.

Note that stocks with Zacks Rank of #1, 2 and 3 have a significantly higher chance of beating earnings. Conversely, the Sell rated stocks (#4 and 5) should never be considered going into an earnings announcement.

Stocks that Warrant a Look

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

Koppers Holdings Inc. KOP has an earnings ESP of +3.08% and a Zacks Rank #2 (Buy).

Franco-Nevada Corporation FNV has an earnings ESP of +7.69% and a Zacks Rank #3.

Golden Star Resources, Ltd. GSS has an Earnings ESP of +14.29% and a Zacks Rank #3.

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AIR PRODS & CHE (APD): Free Stock Analysis Report

KOPPERS HOLDNGS (KOP): Free Stock Analysis Report

FRANCO NV CP (FNV): Free Stock Analysis Report

GOLDEN STAR RES (GSS): Free Stock Analysis Report

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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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