Morningstar | Air Products Continues Impressive Earnings Growth Streak; Raising Fair Value Estimate
We raise our fair value estimate for narrow-moat industrial gas supplier Air Products to $190 from $187 per share as the company continues to show strong momentum, extending its adjusted EPS growth streak to 20 consecutive quarters. Despite 4% currency headwinds, Air Products delivered 12% year-over-year adjusted EPS growth and posted a record 37.7% adjusted EBITDA margin. Additionally, management raised its guidance range for full-year 2019 adjusted EPS to $8.15-$8.30 from $8.05-$8.30. Our fair value estimate increase reflects our updated forecast for the rest of fiscal 2019 and time value of money since our previous update.Sales in the second quarter increased by 1% from the same period last year, fueled by 3% improvements in both volume and pricing, which offset the negative impact of currency headwinds and a modification of a hydrogen contract in India to a tolling agreement. Air Products benefited from solid price performance in all key regions, including a 5% price improvement in Asia. Furthermore, excluding the impact of lower sale of equipment activity in Japan as the project nears completion, volume grew 5% year over year, fueled by new plants coming onstream, including the Lu’An project in China, which we expect to contribute over $0.25 to fiscal-year 2019 EPS.
We reiterate our narrow moat, positive moat trend, and exemplary stewardship ratings, and we remain optimistic about Air Products’ prospects. Thus far, management has spent $2.4 billion and committed another $6.8 billion of its roughly $16.2 billion capital deployment plan. If management can continue to find value-creating opportunities to invest the remaining $7 billion of capital, we estimate that new projects could add around $5-$6 to EPS by the end of fiscal-year 2022 (compared with fiscal-year 2018 adjusted EPS of $7.45).
Air Products and Chemicals serves customers globally with a portfolio of products, services, and solutions that include atmospheric gases, process and other gases, equipment, and services. The company is a supplier of hydrogen and is engaged in helium and liquefied natural gas (LNG) process technology and equipment. The company also develops, engineers, builds, owns and operates industrial gas projects, including gasification projects that convert abundant natural resources into syngas for the production of power, fuels and chemicals. The company designs and manufactures equipment for air separation, hydrocarbon recovery and purification, LNG, and liquid helium and liquid hydrogen transport and storage.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
We have operations in 27 countries.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.