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Investor Insight: Air Products and Chemicals' Fiscal 3Q17 Report

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Part 2
Investor Insight: Air Products and Chemicals' Fiscal 3Q17 Report PART 2 OF 4

Why Analysts See a Dip in APD’s Revenues in Fiscal 3Q17

Air Products and Chemicals’ revenue expectations in fiscal 3Q17

Air Products and Chemicals (APD) follows October 1–September 30 as its fiscal year. Analysts expect APD to post fiscal 3Q17 revenues of ~$2.1 billion, a 15.2% decline on a year-over-year basis. In fiscal 3Q16, APD reported revenues of ~$2.4 billion.

The expected decline in APD’s 3Q17 revenues is primarily due to the impact of the spin-off of its Electronic Materials division, which is now listed as Versum Materials (VSM). The spin-off was completed on October 1, 2016.

Why Analysts See a Dip in APD&#8217;s Revenues in Fiscal 3Q17

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On May 6, 2016, Air Products and Chemicals (APD) entered into a definitive agreement to sell its Performance Materials division to Evonik Industries A.G. for an estimated value of $3.8 billion in cash. The deal was completed on January 3, 2017.

In 3Q16, these two businesses reported revenues of $520 million. Excluding these businesses, APD’s fiscal 3Q16 revenues would be ~$1.9 billion. After accounting for the spin-off and the sale, APD’s expected 3Q17 revenues would represent an increase of ~7.8% on a year-over-year basis.

Influencing factors

Apart from the spin-off and sale of the Electronic Materials and Performance Materials divisions, there have been other positive business developments to drive APD’s revenues. Since the beginning of January 2017, APD has won approximately ten new business deals to supply industrial gases in various geographies.

APD has also entered a couple of joint ventures with Linde North America and INOX Air Products Private Limited to set up new plants in the US and India, respectively. APD also raised the prices of several industrial gases, and new product launches are expected to contribute to APD’s revenues.

Investors looking for exposure to Air Products and Chemicals can invest in the Materials Select Sector SPDR ETF (XLB), which invests 4.6% of its portfolio in APD. The other holdings of the fund include Monsanto (MON) and Praxair (PX), which had weights of 8.5% and 6.4%, respectively, on July 24, 2017.

In the next part, we’ll look into APD’s earnings estimate for fiscal 3Q17.

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