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APD’s Q4 Adjusted EPS Beat the Estimates, Stock Rose

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Air Products and Chemicals’ fourth-quarter earnings

Air Products and Chemicals (APD) announced its fourth-quarter earnings on November 6. The company reported an adjusted EPS of $2.00—an increase of 13.6% on a YoY (year-over-year) basis. In the fourth quarter of 2017, Air Products and Chemicals’ adjusted EPS was $1.76. Air Products and Chemicals beat analysts’ adjusted EPS estimate of $1.99.

Air Products and Chemicals’ adjusted EPS growth was driven by higher volumes, increased prices, a lower tax rate, and higher equity income. The company reported the cost of goods sold as a percentage of sales at ~$1.56 billion, which represents 68.1% of its fourth-quarter revenues—compared to 70.1% in the fourth quarter of 2017. The cost of goods sold improved by 200 basis points YoY. Similarly, the company’s SG&A (selling, general, and administrative) expenses improved by 40 basis points YoY. However, higher raw material costs and an unfavorable foreign exchange currency had a negative impact on Air Products and Chemicals’ EPS.

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Stock price reaction

Air Products and Chemicals stock reacted positively to its third-quarter earnings report. The stock gained 0.5%. Linde (LIN), Eastman Chemical (EMN), and Celanese (CE) gained 2.2%, 0.9%, and 1.9%, respectively.

2019 outlook

Air Products and Chemicals guided the 2019 adjusted EPS to be $8.05–$8.30, which is an increase of 10% over the previous year. For the first quarter of 2019, Air Products and Chemicals expects the adjusted EPS to be $1.85–$1.90.

Investors could invest in the iShares U.S. Basic Materials ETF (IYM), which has invested 5.7% of its portfolio in Air Products and Chemicals.

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