Will Air Products' (APD) Earnings Surprise Estimates in Q2? - Analyst Blog

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Air Products & Chemicals Inc.APD is set to release second-quarter fiscal 2015 results before the opening bell on Apr 30.

Last quarter, the industrial gas giant had delivered a positive earnings surprise of roughly 4%. The company witnessed higher profit in the previous quarter on the back of its cost-reduction measures, improved pricing and productivity efficiencies.

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

Factors to Consider

Air Products is gaining from a diverse customer base, cost-reduction strategies and sustained pricing power. New business deals and strategic investments are expected to support results in fiscal 2015.

The company reported strong first-quarter fiscal 2015 results, with earnings soaring 15.7% and profits rising 13% year over year, respectively. While the company is gaining from its cost-reduction measures, new business wins and strategic investments, it is exposed to currency headwinds and some challenges in its industrial gases business in the Europe, Middle East, and Africa ("EMEA") region.

Air Products also expects to continue delivering higher EBITDA in the rest of 2015 due to its cost-reduction efforts. However, the company anticipates capital expenditures to decline in the second half of the year, owing to the launch of more on-stream projects.

Air Products expects earnings from continuing operations for the second quarter to be in the range of $1.50-$1.55 per share. For fiscal 2015, it anticipates earnings from continuing operations of $6.35-$6.55 per share. The company expects its capital expenditures for the year to be between $1.7 billion and $1.9 billion.

The acquisition of a majority stake in the Chilean industrial gas company - Indura S.A. - has ushered in substantial growth opportunity for Air Product, positioning it as Latin America's second largest industrial gas producer.

However, Air Products' industrial gases business faces certain challenges in the EMEA region. Challenging conditions in Europe are expected to keep industrial gases' volumes under pressure in the region. Moreover, helium volumes remain under pressure due to feedstock supply constraints.

The company is also exposed to unfavorable currency impact, stemming from the weakening of most currencies against the U.S. dollar.

Earnings Whispers

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

Zacks ESP: Earnings ESP for Air Products is 0.00%. This is because the Most Accurate Estimate and the Zacks Consensus Estimate both currently stand at $1.54.

Zacks Rank: Air Products' Zacks Rank #3 (Hold) increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings surprise.

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

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:

Alamos Gold Inc. AGI has an Earnings ESP of +50.00% and a Zacks Rank #3.

Cliffs Natural Resources Inc. CLF has an Earnings ESP of +15.79% and a Zacks Rank #3.

Eldorado Gold Corporation EGO has an Earnings ESP of +50.00% and a Zacks Rank #3.

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

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ELDORADO GOLD (EGO): 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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