Air Products & Chemicals Inc (NYSE: APD) revealed its financial outcomes for the first quarter of fiscal year 2026 on Friday, highlighting a performance that surpassed market forecasts and positively influenced its stock's early trading session. The industrial gases sector leader reported quarterly revenue totaling $3.103 billion, marking a 6% increase from the $2.932 billion achieved in the same period the previous year. This revenue also exceeded analysts' consensus estimate of $3.051 billion.
On the earnings front, the company posted adjusted earnings per share (EPS) of $3.16, which not only indicated a 10% improvement year-over-year but also went beyond the upper threshold of the company's forecast range. The reported adjusted EPS outperformed analysts’ expectations of $3.04.
The growth in sales was driven by a combination of higher energy cost pass-through, favorable currency effects, and pricing increases. Volume figures remained steady compared to the prior year period, as gains in on-site volume were counterbalanced by diminished helium demand and a notable one-time helium sale recorded in the Americas segment during the previous fiscal year.
Examining profitability metrics on a generally accepted accounting principles (GAAP) basis, operating income advanced 14% to reach $735 million. Operating margin expanded by 170 basis points, settling at 23.7%. This improvement occurred despite a roughly 50-basis-point headwind attributable to increased energy cost pass-through in the Americas sector. GAAP EPS was recorded at $3.04, a rise from $2.77 in the comparable quarter of the preceding year.
When considering non-GAAP figures, adjusted operating income grew by 12% to $757 million, and adjusted operating margin enjoyed a 140-basis-point increase, finishing at 24.4%. These results reflect effective operational management amid headwinds.
Chief Executive Officer Eduardo Menezes stated, "We had strong results from the base business, with a 10% increase in adjusted EPS compared to the prior year period, and also posted a 12% improvement in adjusted operating income despite helium headwinds in the quarter. This is a solid start as the Air Products team continues to focus on unlocking earnings growth, optimizing large projects, and maintaining capital discipline."
Segment Highlights
The Americas division reported sales of $1.3 billion, representing a 4% increase over the comparable quarter last year. This growth was driven primarily by a 6% rise in energy cost pass-through and a 2% increase in pricing. However, volume declined by 4%, which partially offset these gains. Operating income for the Americas increased by 4% to $404 million, with the operating margin holding steady at 30.1%.
In the Asia region, sales edged up 2% to $832 million. Operating income grew 7% year-over-year to reach $232 million, and operating margin improved by 140 basis points to 27.9%. This improvement was attributed to productivity enhancements and a reduction in depreciation expenses linked to gasification assets classified as held for sale.
European operations experienced a 12% increase in sales, reaching $782 million. Operating income expanded 20% to $224 million while operating margin widened by 190 basis points to 28.6%, signaling robust profitability in the region.
The Middle East and India equity affiliates generated income of $85 million, consistent with the prior year. Meanwhile, corporate and other sales increased 21% to $117 million, and operating losses narrowed to $109 million, reflecting improved overhead management.
Balance Sheet and Cash Flow
Cash flow from operating activities totaled $900.7 million for the quarter. Ending cash and cash equivalents stood at $1.026 billion, maintaining the company’s strong liquidity position. Long-term debt was recorded at $17.115 billion, with $169.8 million categorized in the current portion of long-term debt and $66.7 million classified as short-term borrowings.
The company incurred business and asset action charges amounting to $28.3 million (or $24.6 million after tax), which translated to $0.11 per share. These charges were related to project exits originally announced in fiscal 2025.
Outlook
Air Products reaffirmed its full-year fiscal 2026 adjusted EPS guidance, maintaining a range between $12.85 and $13.15. This outlook aligns closely with the analyst consensus estimate of $12.96. The company anticipates capital expenditures for fiscal 2026 to approximate $4.0 billion.
For the second quarter of fiscal 2026, adjusted EPS is projected to fall between $2.95 and $3.10, compared to the consensus estimate of $3.02.
Recent developments include ongoing advanced negotiations with Yara International regarding low-emission ammonia projects, an announced quarterly dividend increase to $1.81 per share, and newly awarded supply contracts with NASA totaling over $140 million.
Stock Market Response
Following the earnings announcement, Air Products' stock experienced an upward movement in premarket trading, rising approximately 0.67% to $257.74, according to market data on Friday.