APD Air Products and Chemicals Inc

Effective June 15, 2011, Air Products & Chemicals Inc. (APD) will increase prices for products sold under the trade names Tomamine Surfactant, Tomadry Surfactant, Tomadyne Surfactant, Tomadol Surfactant, Nonidet Surfactant, Nonatell Surfactant and NEODOL Alcohol by 10 cents per pound.

Recently, Air Products reported its second-quarter fiscal 2011 EPS of $1.39 versus $1.16 in the year-earlier quarter, matching the Zacks Consensus Estimate of $1.39.

The result included an after-tax cost of $4 million or 2 cents per share, excluding which adjusted EPS amounted to $1.41 versus $1.23 in the year-ago quarter.

Net sales amounted to $2.5 billion versus $2.2 billion in the prior-year quarter, moving ahead of the Zacks Consensus Estimate of $2.4 billion. The improved results were mainly driven by higher volumes in the Electronics and Performance Materials, Merchant Gases and Tonnage Gases segments.

Management seems confident and committed to improve operating performance driven by increased productivity along with growth in key markets to facilitate the company register strong results year over year.

Management expects double-digit growth in earnings and revenue, improved return on capital and targets a margin of 17%. The company has also raised its full-year earnings guidance range to $5.65 and $5.75 per share. The third quarter EPS is projected in the range of $1.42 to $1.47 per share.

Based in Pennsylvania, Air Products benefits from a long-term take-or-pay contract, a consolidated industry structure, a diverse customer base and sustained pricing power. However, soaring energy and raw material costs pose a threat to margin expansion.

In order to compensate for escalating raw material costs, Air Products has been increasing the price for a range of chemicals it makes for industrial use. Air Products faces stiff competition from Praxair Inc. (PX) and The Linde Group.

We currently have a Zacks #2 Rank (short-term 'Buy' recommendation) on the stock.

 
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