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Air Products and Chemical Beats Estimates in 2Q18, Stock Rises

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Air Products and Chemicals’ fiscal 2Q18 earnings

Air Products and Chemicals (APD) announced its fiscal 2Q18 earnings on April 26. The company reported adjusted EPS (earnings per share) from continuing operations of $1.71, marking an increase of 19.6% YoY (year-over-year) and beating analysts’ estimate of $1.68 per share. The adjusted EPS exclude income tax benefits.

In fiscal 2Q17, its adjusted EPS were $1.43. Air Products and Chemicals’ fiscal year is October 1–September 30.

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The increase in APD’s adjusted EPS was primarily due to higher volumes, improved prices, favorable foreign currency, equity income, lower tax, and cost management. APD’s cost of goods sold comprised 69.9% of its revenue in 2Q18 and 70.9% in 2Q17, marking a gain of 100 basis points YoY. However, its selling, general, and administrative expenses as a percentage of sales were flat.

Stock price reaction

Air Products and Chemicals stock reacted positively to these events, rising 0.43% and closing at $166.29. That day, peer Praxair (PX) announced its 1Q18 earnings. Its stock rose ~4.2% and closed at $155.99.

Earnings guidance

In fiscal 2018, APD raised its adjusted EPS guidance to $7.25–$7.40, implying 15%–17.0% growth YoY. In fiscal 3Q18, APD expects its adjusted EPS to be $1.80–$1.85, marking a 9%–12% increase YoY.

Investors seeking indirect exposure to APD could consider the Materials Select Sector SPDR ETF (XLB), which has a 5.7% exposure to APD. The fund also gives exposure to DowDuPont (DWDP) and Monsanto (MON), of 21.7% and 8.6%, respectively (as of April 26).

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