Air Products & Chemicals (APD, Financial) recently released its results for the fourth quarter. The company saw a marginal increase in revenue, but earnings fell short of estimates. Air Products is focusing on gaining the lost ground and is making advances to be profitable in the coming quarters. In this regard, the company is restructuring the organization as well as taking various cost-cutting initiatives to improve its margins.Ă‚
Results and outlook
In the recently reported quarter, Air Products’ revenue rose by a marginal 3% to $2,677 million which is more than what it posted in the same quarter a year ago. The company also saw good improvement in the sales by 3% to $10.4 billion. In addition, the adjusted EBITDA also improved by 5% to $2.8 million.
Air Products & Chemicals is showing some positive signs of improvement. The main objective of the company is to be the safest and the most profitable industrial gas company in the world.Ă‚
Air Products is mainly focusing on maintaining healthy cash flows. It is focusing on increasing the per share value of the stock and not the growth rate. To achieve this, Air Products is altering the structure and decentralizing the organization. Air Products is also trying to keep the profit margins up by minimizing costs.Ă‚
Growth plan
Air Products has a five-step action plan for growth. Under this, the company will be focusing mainly on the core industrial gases business. Further, restructuring the organisation and improving the margins will be its next priority and in the next quarter, Air Products is expecting these initiatives to pay off on the financial report. Moving ahead, Air Products is also changing the company culture and focusing on some key aspects including safety and simplicity in its business processes. In addition, Air Products is also working on initiatives to increase the shareholder’s wealth.Â
Air Products is confident about the performance of the Merchant Gases segment as it is showing strong momentum. For this segment, Air Products will be mainly focusing on pricing and cost initiatives to deliver further operating leverage.Ă‚
On the international front in Europe, the company is seeing commendable volume performance. It is seeing continuous growth in the LOX/LIN and LAR volumes. But the lower cylinder volumes are a matter of worry. The company is also seeing good new contract signing which indicates better sales in the coming quarters which will definitely improve Air Products financial performance.
Conclusion
The trailing P/E of 28.99 and the forward P/E of 18.49 indicates good earnings growth in the near term. However, in the long term, its earnings are moving with a CAGR of 10.46% which is less than the industry average of 17.24%. But, the cost-cutting efforts that Air Products is implementing is expected to further improve its margins, which will help it to gain market share. This might attract investors to the stock. Also, a good dividend offering is also another key point which can be attractive to the investors. So considering all such facts and statistics, Air Products & Chemicals is a good pick as of now. Long term investors should consider other profitable stocks in their portfolio.
