We are retaining our Neutral rating on industrial gas giant
). While the company should benefit from its cost reduction
measures and acquisitions, we take a cautious stance considering
high energy costs and weakness in the electronics and performance
AIR PRODS & CHE (APD): Free Stock Analysis
CYTEC INDS INC (CYT): Free Stock Analysis
NORTHERN TECH (NTIC): Free Stock Analysis
PPG INDS INC (PPG): Free Stock Analysis
To read this article on Zacks.com click here.
Air Products' third-quarter fiscal 2013 (ended Jun 30, 2013)
earnings from continued operations of $1.36 a share, reported on
Jul 23, matched the Zacks Consensus Estimate. Revenues rose 9%
year over year to $2,547.3 million aided by acquisitions and
healthy gains across the merchant and tonnage gases businesses.
It beat the Zacks Consensus Estimate of $2,543 million.
Management narrowed its earnings guidance for fiscal 2013, citing
challenging economic conditions.
Air Products, a Zacks Rank #3 (Hold) stock, benefits from a
diverse customer base, sustained pricing power and cost-reduction
measures. New business deals and strategic investments are
expected to support results in fiscal 2013.
The acquisition of a 67% stake in Chilean industrial gas company,
Indura S.A., has ushered in substantial growth opportunity for
Air Products. Moreover, the recent EPCO buyout complements Air
Products' goal of expanding its portfolio of industrial gases
offerings in North America.
We are also encouraged by the incremental opportunities in
liquefied natural gas (LNG) market. Air Products has been chosen
for a major off-shore LNG project in Malaysia, representing a
major opportunity for its LNG technology and equipment. Moreover,
in May 2013, the company clinched its first major domestic LNG
heat exchanger order for a liquefaction project in Maryland.
Air Products has also embarked on headcount reduction, keeping a
tight control on expenses and undertaking work process
improvement initiatives. Moreover, it remains committed to
maximize returns to shareholders.
However, Air Products' Electronics and Performance Materials
segment is expected to witness soft demand with delays in new fab
construction and weak outlook for silicon processing. Profits are
expected to fall in the Tonnage Gases division due to lower
polyurethane intermediates (PUI) volume and higher maintenance
spending. Helium volumes also remain weak due to feedstock supply
Moreover, higher energy costs and pension expenses pose a threat
to margin expansion. Higher power costs in the merchant business
and maintenance costs is weighing on Air Products' bottom line.
We also take into account the company's high debt level.
Other Stocks to Consider
Other companies in the chemical industry with favorable Zacks
Northern Technologies International Corp.
Cytec Industries Inc.
PPG Industries Inc.
). While Northern Technologies retains a Zacks Rank #1 (Strong
Buy), both Cytec Industries and PPG carry a Zacks Rank #2