Air Products and Chemicals Inc. Earnings: Higher Expenses Shrinks Margins, Profit Declines

S&P 500 (NYSE:SPY) component Air Products and Chemicals Inc. (NYSE:APD) reported its results for the first quarter. Air Products and Chemicals is a global supplier of gases and chemicals for industrial use. It provides customers in the technology, energy, and healthcare sectors with a variety of services and solutions, including atmospheric gases and semiconductor materials.

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Air Products and Chemicals Earnings Cheat Sheet for the First Quarter

Results: Net income for the chemicals company fell to $248.1 million ($1.16 per share) vs. $268.6 million ($1.23 per share) a year earlier. This is a decline of 7.6% from the year earlier quarter.

Revenue: Rose 1.3% to $2.42 billion from the year earlier quarter.

Actual vs. Wall St. Expectations: APD reported adjusted net income of $1.36 per share. By that measure, the company fell in line with the mean estimate of $1.36 per share. It fell short of the average revenue estimate of $2.53 billion.

Quoting Management: John McGlade, chairman, president and chief executive officer, said, “As we expected, economic growth continued to slow this quarter, depressing volumes and limiting earnings growth. In spite of these economic headwinds, we did improve our operating performance, while lowering costs and winning significant new tonnage contracts.”

Key Stats:

Last quarter’s profit decrease breaks a streak of four consecutive quarters of year-over-year profit increases. In the fourth quarter of the last fiscal year, net income rose 19.4% from the year earlier, while the figure increased 28.9% in the third quarter of the last fiscal year, 20.8% in the second quarter of the last fiscal year and 6.7% in the first quarter of the last fiscal year.

Gross margin shrank 1.3 percentage points to 26.8%. The contraction appeared to be driven by increased costs, which rose 3.1% from the year earlier quarter while revenue rose 1.3%.

Revenue has risen the past four quarters. Revenue increased 11.1% to $2.61 billion in the fourth quarter of the last fiscal year. The figure rose 14.5% in the third quarter of the last fiscal year from the year earlier and climbed 11.2% in the second quarter of the last fiscal year from the year-ago quarter.

The company has now fallen in line with estimates for the past two quarters. It reported net income of $1.51 in the fourth quarter of the last fiscal year and net income of $1.46 in the third quarter of the last fiscal year.

Looking Forward: The outlook for the company’s next quarter performance is unfavorable. Estimates have gone down from an average $1.48 per share to $1.47 over the past seven days. The average estimate for the fiscal year is now $5.97 per share, down from $6.02 sixty days ago.

Competitors to Watch: Airgas, Inc. (NYSE:ARG), Praxair, Inc. (NYSE:PX), Rentech, Inc. (AMEX:RTK).

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(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)