Industrial gas giant Air Products & Chemicals Inc. APD reported third-quarter fiscal 2015 (ended Jun 30, 2015) adjusted earnings from continuing operations of $1.65 a share, up roughly 13% from $1.46 a share recorded in the year-ago quarter. Earnings also beat the Zacks Consensus Estimate of $1.58.
Adjusted earnings exclude one-time items, including charges of $38.8 million associated with business restructuring actions.
Net income from continuing operations, as reported, rose roughly 1.6% to $319 million or $1.47 per share in the quarter from $314 million or $1.46 per share recorded in the year-ago quarter.
Revenues declined 6.2% year over year to $2,470.2 million and were in line with the Zacks Consensus Estimate. The top line was adversely impacted by lower energy pass-through and unfavorable currency swings, which more than offset underlying sales growth.
Underlying sales, barring the company’s exit from the Polyurethane Intermediates (“PUI”) business, rose 4% year over year. Sales improved on the back of a 3% rise in volumes in Industrial Gases – Asia and Materials Technologies, and an increase of 1% in pricing.
Segmental Highlights
Revenues from the Industrial Gases – America segment decreased 16% year over year to $898 million due to 13% lower energy pass-through and a 3% impact of unfavorable currency swings. However, underlying sales remained flat year over year owing to higher pricing which offset lower volumes.
Sales from the Industrial Gases – Europe, Middle East, and Africa (“EMEA”) segment declined 15% year over year to $455 million owing to an unfavorable currency impact of 16%. Underlying sales and pricing were both up 1%.
Sales from the Industrial Gases – Asia segment rose 14% year over year to $418 million, on the back of an 11% increase in volumes mainly owing to new plants coming on stream. Unfavorable currency swings hurt sales by 3%.
Revenues from the Materials Technologies segment went up 3% year over year to $540 million. Underlying sales rose 7% on the back of 4% higher volumes and a 3% increase in pricing. However, these improvements were partly offset by unfavorable currency impact of 4%. Sales of Electronics Materials increased 18% on volume growth in all business units and stronger pricing. Performance Materials’ sales dropped 2% year over year due to lower volumes.
Financial Position
Air Products ended the quarter with cash and cash equivalents of $215.3 million, down 36.2% year over year. Total long-term debt fell 5.3% year over year to $4,690.5 million. Operating cash flow rose 4.7% year over year to $1,657.9 million for the nine months ended Jun 30, 2015.
Outlook
Going forward, Air Products expects earnings from continuing operations for fourth-quarter fiscal 2015 to be in the range of $1.75–$1.85 per share. For fiscal 2015, the company raised its outlook for earnings from continuing operations to $6.50–$6.60 per share from $6.35–$6.55 per share projected earlier. The mid-point of the projected full-year earnings represents a 13% increase from earnings recorded in fiscal 2014.
Air Products also estimates capital expenditures for fiscal 2015 in the range of $1.65−$1.7 billion.
Zacks Rank
Air Products currently carries a Zacks Rank #4 (Sell).
Better-ranked companies in the diversified chemical space include Albemarle Corporation ALB, Innospec Inc. IOSP and Orion Engineered Carbons SA OEC, all sporting a Zacks Rank #1 (Strong Buy).
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