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Air Products and Chemicals Ends Fiscal 2017 with Strong Earnings

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Air Products and Chemicals Ends Fiscal 2017 with Strong Earnings PART 1 OF 6

Air Products and Chemicals’ Fiscal 4Q17 Earnings Beat Estimates

Air Products and Chemicals’ fiscal 4Q17 earnings

Air Products and Chemicals (APD) announced its fiscal 4Q17 earnings on October 26, 2017. The company reported adjusted EPS (earnings per share) from continuing operations of $1.76—an increase of 18.1% on a year-over-year basis.

In fiscal 4Q16, its adjusted EPS was $1.49. Air Products and Chemicals also beat analysts’ estimates of $1.69 per share. APD follows October 1–September 30 as its fiscal year.

Air Products and Chemicals’ Fiscal 4Q17 Earnings Beat Estimates

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The company’s adjusted EPS excludes gains on land sales of $0.03, a tax election benefit of $0.50, and restructuring and cost reduction expenses of $0.14. The increase in its adjusted EPS was primarily driven by higher volumes, price increases, and better cost management. Its cost management measures included improved SG&A (selling, general, and administrative) expenses as a percentage of sales.

In fiscal 4Q17, APD reported SG&A of $187.5 million, representing 8.5% of its sales. In fiscal 4Q16, SG&A represented a 9.0% reduction of 50 basis points on a year-over-year basis.

Further, the foreign exchange currency translations turned positive due to the dollar’s weakness. The reduction in the interest expense also helped boost APD’s earnings.

Stock price reaction

Air Products and Chemicals stock reacted positively to these events, and its stock rose 4.4% and closed at $161.39. On the same day, Air Products and Chemicals’ peer Praxair (PX), which announced its 3Q17 earnings, rose 4.2% and closed at $149.60.

Fiscal 2018 earnings guidance

For fiscal 2018, APD expects its adjusted earnings per share to be $6.85–$7.05, implying growth of 9.0%–12.0% over the previous fiscal year. In fiscal 1Q18, APD expects its adjusted EPS share to be $1.60–$1.70, which does not include any acquisitions and joint ventures.

Investors looking for indirect exposure to APD can invest in the Materials Select Sector SPDR ETF (XLB), which holds 5.3% of its portfolio in APD. The fund also gives exposure to DowDuPont (DWDP) and Monsanto (MON), with respective weights of 23.2% and 8.1% on October 26, 2017.

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