Air Products and Chemicals Inc.
) announced that the company has signed a Memorandum of
) with FuelCell Energy Inc. As per the contract, the companies will
work towards the market development of stationary Direct FuelCell
(DFC) power plants that simultaneously produce hydrogen,
ultra-clean electricity and usable high quality heat.
The companies intend to develop tri-generation stationary fuel
cell power plants' market around the world. The tri-generation
stationery will cater to industrial hydrogen users and vehicle
fueling applications. By producing hydrogen at locations, which are
easily accessible by the industrial hydrogen users and vehicle
fueling applications, the companies aim to build a base for
Moreover, by using DFC power plants at the usage point, the
companies intend to create employment opportunities for the local
people. The industrial users of hydrogen will have the advantage to
utilize all the three DFC revenue streams including hydrogen,
electricity and heat.
FuelCell, based in Danbury in Connecticut, (United States of
America), is a manufacturer of ultra-clean, efficient and reliable
fuel cell power plants. The company believes by utilizing
FuelCell's leading technology along with Air Products' market
strength and distribution capabilities, they can provide a hydrogen
infrastructure based on the current demand.
If hydrogen, which is an alternative fuel, is available locally,
then it can reduce the company's dependence on the imported oil
while significantly reducing greenhouse gas emissions. Air Products
and FuelCell Energy are already working together on a three-year
hydrogen production project in California, which began in 2011.
Recently, Air Products released its first-quarter 2012 results.
The company reported an EPS of $1.36 in the quarter versus $1.35 in
the year-earlier quarter, which is in line with the Zacks Consensus
Net sales amounted to $2.4 billion, up 1% year over year, but
down 7% sequentially. The increase was due to higher prices in
Merchant Gases and Performance Materials. However, sales were below
the Zacks Consensus Estimate of $2.5 billion.
Looking ahead, management expects second-quarter 2012 results to
remain disappointing. However, growth in Asia and North America is
expected to accelerate in the second half of 2012, coupled with
improved operating performance and new plant on-streams, leading to
stronger sales and earnings growth in the later half of 2012. The
company's recent orders, strong project backlog and robust bidding
activity position it well to achieve 2015 goals for growth, margin
Air Products continues to maintain EPS guidance in the range of
$5.90 to $6.30 for fiscal 2012. The company expects second-quarter
EPS to be between $1.37 and $1.43.
Air Products benefits from a long-term take-or-pay contract, a
consolidated industry structure, diverse customer base and
sustained pricing power. However, soaring energy and raw material
costs pose a threat to margin expansion. The company faces stiff
Currently, the company retains a Zacks #3 Rank, which translates
into a short-term (1 to 3 months) Hold rating and we have
recommended the shares of the company as Neutral for the long term
(more than 6 months).
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