Bjoern Wylezich It has been a rocky year for Air Products and Chemicals, Inc. (NYSE:APD) with shares down 13% from a year ago. However, investors got some much-needed relief on Thursday when shares popped over 10% in response to mixed earnings that simply were not as bad as feared. I last covered APD in May, rating shares a "buy," and since that recommendation, it has rallied 13% vs. the market's 4% gain. With new financial data and this appreciation, now is a good time to revisit Air Products. I remain bul ...

After sliding for most of the week, Air Products stock popped following a strong earnings report.With shares of Air Products and Chemicals (APD 9.85%) closing lower on Tuesday and Wednesday this week, it seemed that investors were wary of the company's reporting of its third-quarter results. This morning, however, those fears were evidently erased as the producer and distributer of industrial gases reported strong third-quarter earnings before the market opened.As of 10:42 a.m. ET on Thursday, shares of Air ...

Air Products and Chemicals, Inc. (NYSE:APD) Q3 2024 Earnings Conference Call August 1, 2024 8:30 AM ET Company Participants Sidd Manjeshwar - Vice President, Investor Relations Seifi Ghasemi - Chairman, President and Chief Executive Officer Eric Guter - Investor Relations Melissa Schaeffer - Chief Financial Officer Conference Call Participants John McNulty - BMO Capital Markets Jeff Zekauskas - JPMorgan Vincent Andrews - Morgan Stanley David Begleiter - Deutsche Bank Chris Parkinson - Wolfe Research Duffy F ...

Core Insights - Air Products and Chemicals reported revenue of $2.99 billion for the quarter ended June 2024, a decrease of 1.6% year-over-year, with EPS at $3.20 compared to $2.98 in the same quarter last year [1] - The revenue fell short of the Zacks Consensus Estimate of $3.04 billion, resulting in a surprise of -1.79%, while the EPS exceeded expectations by 5.26% [1] Revenue Performance by Segment - Revenue from Industrial Gases in the Middle East and India was $32.80 million, significantly below the estimated $38.39 million, reflecting a year-over-year decline of 17.4% [3] - Revenue from Industrial Gases in the Americas was $1.23 billion, slightly below the average estimate of $1.24 billion, marking a year-over-year decrease of 2.1% [4] - Revenue from Industrial Gases in Europe reached $693.40 million, surpassing the estimated $682.37 million, but still showing a year-over-year decline of 1.9% [5] - Revenue from Industrial Gases in Asia was $789.60 million, below the average estimate of $818.21 million, indicating a year-over-year decrease of 4.1% [6] - Revenue from Corporate and other segments was $235 million, exceeding the estimated $230.80 million, with a year-over-year increase of 15.2% [7] Stock Performance - Shares of Air Products and Chemicals have increased by 4.3% over the past month, outperforming the Zacks S&P 500 composite, which rose by 1.1% [7]

Core Viewpoint - Air Products and Chemicals, Inc. reported a year-over-year increase in earnings per share for the third quarter of fiscal 2024, despite a slight decline in revenues, primarily due to unfavorable currency impacts and lower energy cost pass-throughs [1][2]. Financial Performance - Earnings from continuing operations for Q3 fiscal 2024 were $3.13 per share, up from $2.67 in the same quarter last year [1]. - Adjusted earnings per share, excluding one-time items, were $3.20, surpassing the Zacks Consensus Estimate of $3.04 [1]. - Total revenues for the quarter were $2,985.5 million, a decrease of approximately 1.6% year-over-year, and below the Zacks Consensus Estimate of $3,039.8 million [1]. Segment Highlights - Revenues in the Americas segment fell 2.1% year-over-year to $1,234.7 million, missing the Zacks Consensus Estimate of $1,279.6 million, due to lower energy cost pass-throughs and reduced volumes [2]. - The Europe segment saw a 1.9% decline in revenues to $693.4 million, also below the Zacks Consensus Estimate of $697.8 million, attributed to lower energy cost pass-throughs and adverse currency effects [2]. - The Asia segment experienced a 4% revenue decline to $789.6 million, which was above the Zacks Consensus Estimate of $783.8 million, with decreased demand for merchant products and reduced volumes being the main factors [2]. Financial Position - As of the end of Q3, the company had cash and cash equivalents of approximately $2,375.7 million, reflecting a 25% year-over-year increase [3]. - Long-term debt rose by 48% year-over-year to $12,786.4 million [3]. Outlook - Air Products maintained its full-year adjusted EPS projection for fiscal 2024 at $12.20 to $12.50, indicating a 6-9% increase from the previous year [4]. - The adjusted EPS guidance for the fiscal fourth quarter is set at $3.33-$3.63 [4]. - The company anticipates capital expenditures between $5 billion and $5.5 billion for fiscal 2024 [4]. Price Performance - Over the past year, the company's shares have declined by 11.8%, compared to an 8.1% decline in the industry [5].

Company Performance - Air Products and Chemicals reported quarterly earnings of $3.20 per share, exceeding the Zacks Consensus Estimate of $3.04 per share, and up from $2.98 per share a year ago, representing an earnings surprise of 5.26% [1] - The company posted revenues of $2.99 billion for the quarter ended June 2024, which was below the Zacks Consensus Estimate by 1.79% and a decrease from $3.03 billion year-over-year [1] - Over the last four quarters, the company has surpassed consensus EPS estimates three times but has not beaten consensus revenue estimates [1] Stock Performance and Outlook - Air Products and Chemicals shares have declined approximately 3.6% since the beginning of the year, contrasting with the S&P 500's gain of 15.8% [2] - The current consensus EPS estimate for the upcoming quarter is $3.50 on revenues of $3.26 billion, and for the current fiscal year, it is $12.26 on revenues of $12.28 billion [4] Industry Context - The Chemical - Diversified industry, to which Air Products and Chemicals belongs, is currently ranked in the bottom 5% of over 250 Zacks industries, indicating potential challenges for stock performance [5] - Another company in the same industry, Innospec, is expected to report quarterly earnings of $1.37 per share, reflecting a year-over-year increase of 7%, with revenues anticipated to be $479.2 million, down 0.3% from the previous year [5][6]

Moving forward Creating Shareholder Value Third Quarter 2024 Earnings Results Teleconference August 1, 2024 Moving forward Forward-Looking Statements This presentation contains "forward-looking statements" within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements about earnings guidance, business outlook and investment opportunities. These forward-looking statements are based on management's expectations and assumptions as of the date of this presentatio ...

[Fiscal 2024 Third Quarter Financial & Operational Overview](index=1&type=section&id=Fiscal%202024%20Third%20Quarter%20Financial%20%26%20Operational%20Overview) [Q3 FY2024 Financial Highlights](index=1&type=section&id=Q3%20FY2024%20Financial%20Highlights) Air Products reported strong year-over-year growth in profitability for the third quarter of fiscal 2024. GAAP EPS increased by 17% and adjusted EPS grew by 7%. The company also achieved significant margin expansion, with GAAP net income margin up 360 basis points and adjusted EBITDA margin up 260 basis points Q3 FY2024 Key Financial Metrics (vs. Q3 FY2023) | Metric | Q3 FY2024 | Change (YoY) | | :--- | :--- | :--- | | GAAP EPS | $3.13 | +17% | | Adjusted EPS* | $3.20 | +7% | | GAAP Net Income | $709 million | +16% | | Adjusted EBITDA* | $1.3 billion | +5% | | GAAP Net Income Margin | 23.7% | +360 bps | | Adjusted EBITDA Margin* | 42.4% | +260 bps | [Recent Operational & Strategic Highlights](index=1&type=section&id=Recent%20Operational%20%26%20Strategic%20Highlights) The company announced significant strategic moves in its clean energy and core industrial gas businesses. Key developments include a long-term green hydrogen supply agreement with TotalEnergies, the divestiture of its LNG business to Honeywell, and investments to expand production capacity and serve growing markets in the U.S. - Signed a 15-year agreement to supply **70,000 tons of green hydrogen annually** to TotalEnergies' Northern European refineries starting in 2030[2](index=2&type=chunk) - Announced an all-cash transaction to divest its liquefied natural gas (LNG) technology and equipment business to Honeywell for **$1.81 billion**, expected to close before the end of the calendar year[2](index=2&type=chunk) - Plans to build new air separation units in Georgia and North Carolina and invest **$70 million** to expand its gas separation membrane manufacturing center in Missouri to meet growing demand in biogas, hydrogen recovery, and aerospace[3](index=3&type=chunk) - Announced plans to build commercial-scale hydrogen refueling station networks in California and along major European transportation corridors[2](index=2&type=chunk) [Fiscal 2024 & Q4 Outlook](index=1&type=section&id=Fiscal%202024%20%26%20Q4%20Outlook) Air Products confirmed its full-year fiscal 2024 guidance for adjusted EPS and capital expenditures. The company also issued adjusted EPS guidance for the fourth quarter, projecting continued growth FY2024 and Q4 Guidance | Metric | Guidance Range | Implied Growth (YoY) | | :--- | :--- | :--- | | **Full-Year FY2024** | | | | Adjusted EPS | $12.20 to $12.50 | 6% to 9% | | Capital Expenditures | $5.0 billion to $5.5 billion | - | | **Q4 FY2024** | | | | Adjusted EPS | $3.33 to $3.63 | 6% to 15% (vs. Q4'23 Adj. EPS of $3.15) | [Detailed Financial Performance](index=2&type=section&id=Detailed%20Financial%20Performance) [Consolidated Results of Operations (Q3 FY2024)](index=2&type=section&id=Consolidated%20Results%20of%20Operations%20%28Q3%20FY2024%29) In Q3 FY2024, consolidated sales decreased by 2% to $3.0 billion, primarily due to unfavorable currency and lower energy cost pass-through. Despite the sales decline, GAAP net income rose 16% to $709 million, and adjusted EBITDA grew 5% to $1.3 billion, driven by favorable pricing, improved business mix, and productivity gains that offset higher maintenance costs and inflation Q3 FY2024 Consolidated Performance | Metric | Q3 FY2024 | Change (YoY) | Key Drivers | | :--- | :--- | :--- | :--- | | Sales | $3.0 billion | -2% | -2% currency, -1% energy pass-through, +1% pricing | | GAAP Net Income | $709 million | +16% | Favorable pricing, favorable mix, prior year charge for business actions | | Adjusted EBITDA | $1.3 billion | +5% | Positive pricing, favorable mix, improved productivity | [Segment Performance (Q3 FY2024)](index=2&type=section&id=Segment%20Performance%20%28Q3%20FY2024%29) Segment performance was mixed in the third quarter. The Americas and Europe delivered strong adjusted EBITDA growth of 6% and 12% respectively, driven by higher pricing and volumes from new assets. Conversely, Asia's adjusted EBITDA declined by 9% due to planned maintenance outages and lower merchant product demand. Middle East and India equity affiliates' income also decreased by 7% Q3 FY2024 Performance by Business Segment (vs. Q3 FY2023) | Segment | Sales | Sales Change | Adjusted EBITDA | Adj. EBITDA Change | Key Drivers | | :--- | :--- | :--- | :--- | :--- | :--- | | Americas | $1.2B | -2% | $604M | +6% | Higher pricing, offset by lower energy pass-through and volumes | | Asia | $790M | -4% | $324M | -9% | Planned maintenance outages, unfavorable currency | | Europe | $693M | -2% | $283M | +12% | Increased volume from new assets, pricing net of variable costs | | Middle East & India | N/A | N/A | N/A | -7% (Equity Income) | Higher costs | [Consolidated Financial Statements (Unaudited)](index=5&type=section&id=Consolidated%20Financial%20Statements%20%28Unaudited%29) [Consolidated Income Statements](index=5&type=section&id=Consolidated%20Income%20Statements) For the third quarter ended June 30, 2024, sales were $2.99 billion, a slight decrease from $3.03 billion in the prior year. However, operating income increased to $737.6 million from $644.2 million, and net income attributable to Air Products rose to $696.6 million, or $3.13 per diluted share, compared to $595.6 million, or $2.67 per diluted share, in the same period last year Q3 Income Statement Highlights (in millions, except EPS) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | | :--- | :--- | :--- | | Sales | $2,985.5 | $3,033.9 | | Operating Income | $737.6 | $644.2 | | Net Income Attributable to Air Products | $696.6 | $595.6 | | Diluted EPS | $3.13 | $2.67 | [Consolidated Balance Sheets](index=6&type=section&id=Consolidated%20Balance%20Sheets) As of June 30, 2024, the company's total assets grew to $37.0 billion from $32.0 billion at fiscal year-end 2023. This increase was primarily driven by a significant rise in net plant and equipment. Total liabilities also increased to $20.3 billion from $16.3 billion, largely due to a substantial increase in long-term debt Balance Sheet Summary (in millions) | Metric | June 30, 2024 | Sept 30, 2023 | | :--- | :--- | :--- | | Total Current Assets | $5,677.4 | $5,200.5 | | Plant and equipment, net | $21,482.1 | $17,472.1 | | **Total Assets** | **$36,974.3** | **$32,002.5** | | Total Current Liabilities | $4,474.5 | $3,895.8 | | Long-term debt | $12,786.4 | $9,280.6 | | **Total Liabilities** | **$20,287.3** | **$16,342.2** | | **Total Equity** | **$16,687.0** | **$15,660.3** | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For the nine months ended June 30, 2024, cash provided by operating activities increased to $2.69 billion from $2.20 billion in the prior year. Cash used for investing activities rose to $4.77 billion, driven by higher additions to plant and equipment. Cash provided by financing activities was $2.85 billion, primarily from long-term debt proceeds used to fund investments Nine-Month Cash Flow Summary (in millions) | Metric | Nine Months Ended June 30, 2024 | Nine Months Ended June 30, 2023 | | :--- | :--- | :--- | | Cash Provided by Operating Activities | $2,689.7 | $2,203.4 | | Cash Used for Investing Activities | ($4,773.8) | ($4,399.8) | | Cash Provided by Financing Activities | $2,847.7 | $1,098.9 | | Increase (Decrease) in cash | $758.7 | ($1,073.3) | [Reconciliation of Non-GAAP Financial Measures](index=9&type=section&id=Reconciliation%20of%20Non-GAAP%20Financial%20Measures) [Adjusted Diluted EPS Reconciliation](index=10&type=section&id=Adjusted%20Diluted%20EPS%20Reconciliation) The company reconciled its Q3 FY24 GAAP EPS of $3.13 to an adjusted EPS of $3.20. The net adjustment of $0.07 per share primarily reflects the exclusion of non-service related pension costs, partially offset by a gain from the de-designation of cash flow hedges. This compares to a prior-year adjustment of $0.31 per share, which included a significant charge for business and asset actions Q3 FY2024 GAAP to Non-GAAP EPS Reconciliation | Description | Per Share Impact | | :--- | :--- | | **Q3 2024 GAAP Diluted EPS** | **$3.13** | | (Gain) Loss on de-designation of cash flow hedges | ($0.01) | | Non-service pension cost, net | $0.09 | | **Q3 2024 Non-GAAP ("Adjusted") Diluted EPS** | **$3.20** | [Adjusted EBITDA Reconciliation](index=11&type=section&id=Adjusted%20EBITDA%20Reconciliation) Consolidated adjusted EBITDA for Q3 FY24 was $1.27 billion, a 5% increase from $1.21 billion in the prior year. The adjusted EBITDA margin expanded by 260 basis points to 42.4%. The reconciliation starts with GAAP net income and adds back interest, taxes, depreciation & amortization, and other non-GAAP adjustments Q3 Consolidated Adjusted EBITDA Reconciliation (in millions) | Metric | Q3 FY2024 | Q3 FY2023 | | :--- | :--- | :--- | | Net income | $708.9 | $610.5 | | Add: Interest, Taxes, D&A, etc. | $557.9 | $538.6 | | Add: Business and asset actions | - | $59.0 | | **Adjusted EBITDA** | **$1,266.8** | **$1,208.1** | | **Adjusted EBITDA Margin** | **42.4%** | **39.8%** | [Capital Expenditures Reconciliation](index=13&type=section&id=Capital%20Expenditures%20Reconciliation) The company presents a non-GAAP capital expenditures figure of $3.88 billion for the first nine months of FY2024. This is reconciled from the GAAP measure 'Cash used for investing activities' by adjusting for investment purchases/proceeds and, most significantly, excluding expenditures for the NEOM Green Hydrogen project that were funded by joint venture partners rather than Air Products' own equity Nine-Month Capital Expenditures Reconciliation (in millions) | Description | Nine Months Ended June 30, 2024 | | :--- | :--- | | Cash used for investing activities (GAAP) | $4,773.8 | | Adjustments for investment proceeds/purchases, etc. | ($343.9) | | NGHC expenditures not funded by Air Products' equity | ($1,242.0) | | **Capital expenditures (Non-GAAP)** | **$3,875.7** |

Q3 FY24 (comparisons versus prior year):GAAP EPS# of $3.13, up 17 percent; GAAP net income of $709 million, up 16 percent; and GAAP net income margin of 23.7 percent, up 360 basis pointsAdjusted EPS* of $3.20, up seven percent; adjusted EBITDA* of $1.3 billion, up five percent; and adjusted EBITDA margin* of 42.4 percent, up 260 basis pointsRecent HighlightsClean hydrogen / energy transitionSigned a 15-year agreement to supply 70,000 tons of green hydrogen annually starting in 2030, helping to decarbonize T ...

Chemical companies are expected to have benefited from a rebound in demand across several key end markets and a moderation of de-stocking activities in the June quarter. The results of these companies are likely to be supported by the benefits of pricing and cost-saving actions. Per the Zacks industry classification, the chemical industry falls under the broader Basic Materials sector. The second-quarter earnings picture for this sector looks bleak. Basic Materials is among the Zacks sectors that are expect ...