Air Products and Chemicals Inc. (APD) is scheduled to report third quarter 2010 earnings on October 21, 2010, before the market opens.
Air Products expects fiscal 2010 earnings to grow over 20% as the global economy, led by Asia, experiences gradual recovery, coupled with the leverage in its existing capacity, new projects and improving productivity. As a result, the company lifted its guidance for fiscal 2010 again to $4.94−$5.00 per share from its previous guidance of $4.90−$5.00. Air Products expects fourth quarter earnings of $1.27–$1.33 per share. The company has consistently boosted margins and is on track to meet the 17% goal set for 2011.
Analysts expect the industrial gas and specialty chemical producer to report earnings of $1.32 per share on sales of $2.3 billion in the upcoming quarter while they are looking for earnings of $4.99 per share on revenues of $9 billion for the full year 2010. In the previous quarter, the company recorded earnings of $1.28 per share, matching the Zacks Consensus Estimate.
Air Products shares have surged higher on positive market sentiments over the last three months and are trading at near to the 52-week high of $85.44.
Third Quarter Highlights
Air Products and Chemicals’ third quarter 2010 net earnings more than doubled to $253.2 million or $1.17 a share, versus last year’s $114.6 million or 53 cents. Excluding non-recurring charges, the specialty chemical producer earned $277 million or $1.28 per share, in line with the Zacks Consensus Estimate. Results, however, overtook the company’s own guidance of $1.25 to $1.29 per share. Solid earnings growth came from higher revenues.
Third quarter revenues leaped 14% year over year to about $2.2 million on higher volumes across all business segments due to new contract wins. However, revenues fell short of the Zacks Consensus Estimate of $2.3 billion. Cost of sales increased 13% year over year to $1.6 billion. Operating income increased 22% to $374 million, leading to an operating margin of 17% in the quarter.
Zacks Consensus Estimate
For the fourth quarter of 2010, analysts surveyed by Zacks are looking for earnings of $1.32 per share, representing a 15.50% growth in annualized estimate. For the full year, earnings forecast of $4.99 per share is up 22.87% from the year-ago guidance.
Analysts mostly remain in agreement. Notably, there is no movement in the Zacks Consensus Estimate over the last one week as well as 30-day period. However, over the last 30 days, only 1 of the 12 analysts covering the stock slashed the estimate for the next quarter.
With respect to earnings surprises, Air Products has topped the Zacks Consensus Estimate in three of the trailing four quarters by 2 cents to 3 cents, which is reflected in the average surprise of 2.01%. However, the current fourth quarter has a downside potential of 0.76%. For 2011, the Zacks Consensus Estimate of $5.61 per share moved up 12.39% annually.
We see analysts and investors are more positive on Air Product’s peer Eastman Chemical (EMN), which is trading at a P/E that is substantially below the industry average. The company’s diversified chemical portfolio, restructuring and cost cutting efforts are driving earnings. All of the 7 analysts covering the stock have upped their earnings estimate for the upcoming quarter.
Air Products is doing consistently well. We are particularly encouraged by Air Products new contract wins across its industrial gas business in the recent months, reflecting a robust growth momentum in the developing markets of Asia, where the company has a strong presence. After the last quarter’s results, we upgraded Eastman to Outperform from the previous Neutral recommendation. Air Products carries a short-term (1 to 3 months) Zacks #3 Rank.
Disclosure: No positions