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APD’s Industrial Gases-Asia Segment’s Revenue Grew in 3Q17

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Industrial Gases-Asia segment

Air Products & Chemicals’ (APD) Industrial Gases-Asia segment was the second-largest revenue generator for the company. The segment accounted for 25.50% in 3Q17—compared to 23.50% in 3Q16. The segment reported revenue of $538.3 million—an increase of 19.90% on a YoY (year-over-year) basis. In fiscal 3Q16, the segment reported revenue of $449 million.

The segment’s revenue growth was primarily driven by higher volume growth. The volume grew because the company had new business deals in China and increased equipment sales. Increased pricing also contributed to the segment’s revenue growth. However, the foreign exchange currency remained unfavorable, which had a negative impact on Air Products & Chemicals’ revenue.

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Operating income and margin

The segment reported operating income of $149.1 million in 3Q17—compared to $118.70 million in fiscal 3Q16. It implies an increase of 25.60% on a YoY basis. The higher revenue growth and higher operating income resulted in the higher operating margin. The segment reported an operating margin of 27.70%—compared to 26.40% in fiscal 3Q16. It implies an increase by 130 basis points on a YoY basis. The increase in the operating income and margins was driven by higher volumes and increased prices.

Outlook

The Industrial Gas-Asia segment is expected to continue its strong growth due to expected higher volume growth in China. The segment is expected to continue its new business wins in the region, which will contribute to its growth.

Investors can indirectly invest in Air Products & Chemicals by investing in the First Trust Capital Strength ETF (FTCS). FTCS has invested 2.10% of its portfolio in Air Products & Chemicals. The fund’s other holdings include Boeing (BA), Lowe’s (LOW), and Walmart (WMT) with weights of 2.20%, 2.10%, and 2.10%, respectively, as of August 1, 2017.

In the next part, we’ll discuss analysts’ latest recommendations after 3Q17.

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