EARNINGS PREVIEW:US Chemical Cos See Continued Rebound In Demand
April 14 2011 - 11:45AM
Dow Jones News
TAKING THE PULSE: Cheap natural gas has given U.S. chemicals
producers a competitive lift above overseas rivals, and supply
bottlenecks started to emerge even before Japan's crisis hit some
specialty segments. High raw material prices and a possible return
to slower economic growth will pose tough choices for industry
executives about investment and deal-making, which has made a
return in recent months.
COMPANIES TO WATCH:
Air Products & Chemicals Inc. (APD) - reports April 21
Wall Street Expectations: Analysts expect a fiscal
second-quarter profit of $1.39 a share and $2.43 billion in
revenue. A year earlier, the then-suitor of Airgas Inc. (ARG)
reported a profit of $1.16 a share, which included a 7-cent charge
related to the acquisition bid, on $2.25 billion in sales.
Key Issues: Air Products has posted expectation-beating results
of late as its merchant gases business, its largest by revenue,
grows on booming sales in Asia. The company in the fiscal first
quarter also saw double-digit growth in its electronics and
performance materials segment and tonnage gases segment, which
sells hydrogen, synthesis gas and carbon monoxide to refineries and
other large manufacturers. The industrial-gas maker has cited
rising raw materials costs for some recently announced pricing
increases, but still managed to raise its quarterly dividend 18%
last month in a bid to return value to shareholders after the
company's bruising attempt to take over rival Airgas.
DuPont (DD) - reports April 21
Wall Street Expectations: Wall Street forecasts a first-quarter
profit of $1.36 a share on $9.19 billion in revenue. A year
earlier, the company posted a per-share profit of $1.24, including
10 cents of currency benefits, on revenue of $8.48 billion.
Key Issues: The 209-year-old U.S. manufacturer has almost closed
its $5.8-billion acquisition of Danisco A/S (DNSCY, DCO.KO), a
Danish ingredients and enzyme maker that is seen as complementing
DuPont's nutrition and biotechnology operations. Fitch Ratings last
month raised its outlook on DuPont, noting its global reach to
vital emerging markets, margin-boosting patent protections and
robust end-market demand for many of its chemicals. The ratings
agency also said the chemicals maker's credit profile should be
able to weather the Danisco acquisition.
Praxair Inc. (PX) - reports April 27
Wall Street Expectations: Praxair has forecast a first-quarter
per-share profit of $1.23 to $1.28 a share, bracketing analysts'
most recent $1.26 projection. Wall street also expects $2.64
billion in revenue. Last year, the company earned $1.01 a share,
which included 8-cent tax charge, on $2.43 billion in revenue.
Key Issues: The largest industrial gas company in North and
South America continues to benefit from its strong position in
emerging markets. A Jefferies analysis sees once-languishing North
American packaged gas sales stabilizing, though still below their
2008 peak, while hydrogen demand from countries like Mexico and
Brazil accelerates. Praxair will look to pass rising input costs
onto customers with price increases.
Dow Chemical Co. (DOW) - reports April 28
Wall Street Expectations: Analysts see Dow Chemical earning a
first-quarter profit of 65 cents a share and $13.92 billion in
revenue. The company reported a prior-year per-share profit of 41
cents, or 43 cents excluding restructuring costs and other items,
on revenue of $13.42 billion
Key Issues: The largest U.S. chemical producer by revenue
continues to diversify its portfolio of specialty chemicals,
agricultural products and other high-tech offerings that reap
bigger margins than commodity chemicals. In the first quarter, the
company launched its sixth business segment, the performance
plastics division, to specifically cater to the packaging, hygiene,
food and telecom industries. Overall margins have expanded for
seven straight quarters as the company focuses on more lucrative
materials, but Chief Executive Andrew Liveris in February warned of
trouble ahead if Dow's robust sales gains fail to keep up with
emerging-market inflation.
LyondellBasell Industries NV (LYB) - expected to report April 29
Wall Street Expectations: Analysts expect the company formed
after the 2007 merger of Houston-based Lyondell and the European
Basell to earn a fiscal first-quarter profit of 72 cents a share on
$10.62 billion in revenue. LyondellBasell was going through Chapter
11 bankruptcy proceedings last year before it emerged as a new
company through a record $8 billion in debtor-in-possession
financing.
Key Issues: Business conditions and results improved last year,
most notably in the olefins and polyolefins and propylene oxide
businesses. At the same time, planned turnarounds at
LyondellBasell's Houston oil refinery are expected to soften
results, and the company last month had to revise its
fourth-quarter earnings downward after a correction to its tax
accounting. Still, analysis from Dahlman Rose points to the
company's improved scale and feedstock flexibility as
strengths.
Airgas Inc. (ARG) - reports May 5
Wall Street Expectations: Analysts see Airgas' fourth-quarter
earnings at 85 cents a share on $1.07 billion in revenue. A year
earlier, the company made 47 cents a share, which included 22 cents
a share in legal charges and other items, on $980.4 million in
revenue.
Key Issues: After successfully fending off a year-long hostile
approach from Air Products, Airgas will focus more on mundane
metrics such as cylinder utilization, which has climbed for two
straight quarters. Pricing traction and its lobbying efforts on tax
overhaul -- Airgas has one of the highest corporate rates in the
sector -- will also be in focus.
(The Thomson Reuters estimates and year-earlier figures may not
be comparable due to one-time items and other adjustments.)
-By Drew FitzGerald, Dow Jones Newswires; 212-416-2909;
Andrew.FitzGerald@dowjones.com
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