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What's in the Cards for Air Products (APD) in Q4 Earnings?

Air Products & Chemicals, Inc . APD is slated to release fourth-quarter fiscal 2017 results before market opens on Oct 26.

The company logged adjusted earnings of $1.65 per share in the fiscal third quarter, up 15% from the year-ago quarter. Earnings surpassed the Zacks Consensus Estimate of $1.60 per share.

Air Products posted net sales of $2.12 billion in the quarter, up 11% year over year, beating the Zacks Consensus Estimate of $2.05 billion.

Air Products surpassed the Zacks Consensus Estimate in three of the trailing four quarters while missing in one, with an average beat of around 1.8%.

Let's see how things are shaping up for this announcement.

Air Products and Chemicals, Inc. Price and EPS Surprise

Air Products and Chemicals, Inc. Price and EPS Surprise | Air Products and Chemicals, Inc. Quote

Factors to Consider

For fourth-quarter fiscal 2017, Air Products anticipates adjusted earnings per share from continuing operations of $1.65-$1.70 per share, which at midpoint, also represents a 12% increase over last year.

Revenues for Air Products' Industrial Gases - America segment for the fourth quarter is projected to witness a 0.1% rise from the third quarter as the Zacks Consensus Estimate for the fourth quarter is pegged at $931 million. Operating income is also expected to increase 1.7% sequentially as the Zacks Consensus Estimate is $240 million for the fourth quarter.

Air Products' Industrial Gases - Asia segment revenues are expected to decline 7.4% from the third quarter as the Zacks Consensus Estimate for the fourth quarter is pegged at $498 million. A 9.4% decline in operating income is expected to be witnessed in the segment as the Zacks Consensus Estimate is $135 million for the fourth quarter.

The Zacks Consensus Estimate for revenues for the Industrial Gases - EMEA segment is expected to be $451 million for the fourth quarter, reflecting an estimated 0.2% decline on a sequential basis. Segment income is also expected to increase 11.7% sequentially as the Zacks Consensus Estimate is $105 million for the fourth quarter.

Industrial Gases - Global segment will witness a 2.1% rise in net sales as the Zacks Consensus Estimate is pegged at $191 million for the fourth quarter. Segment income is expected to decline 23% sequentially as the Zacks Consensus Estimate is $21.5 million for the third quarter.

Air Products is well placed to leverage the cyclical recovery in core industrial end-markets. The company has a strong project backlog. These projects are expected to be accretive to earnings and cash flow over the next few years. Acquisitions and new business wins are expected to continue to drive results.

Air Products also remains on track with its $600 million cost-reduction programs, which should lend support to margins.

Moreover, Air Products has 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 (including acquisitions and large industrial gases projects) to create shareholders value over the next three years.

Air Products' shares have moved up 5.9% in the past three months underperforming the industry 's gain of 8.4%.

Earnings Whispers

Our proven model does not conclusively show that Air Products is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here as you will see below:

Zacks ESP : Earnings ESP for Air Products is currently pegged at 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at $1.69 per share. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks Rank : Air Products currently carries a Zacks Rank #2. Though a Zacks Rank #2 increases the predictive power of ESP, a 0.00% ESP makes surprise prediction difficult.

Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks With Favorable Combination

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

FMC Corporation FMC has an Earnings ESP of +0.88% and a Zacks Rank #1. You can see the complete list of today's Zacks #1 Rank stocks here .

Westlake Chemical Corporation WLK has an Earnings ESP of +5.14% and sports a Zacks Rank #1.

Ingevity Corporation NGVT has an Earnings ESP of +2.94% and flaunts a Zacks Rank #1.

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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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