EARNINGS PREVIEW: Material Costs Still In Focus For US Chemical Cos
July 18 2011 - 2:49PM
Dow Jones News
TAKING THE PULSE: Profits in the chemical industry are generally
expected to rise this quarter as the sector enjoys a broad recovery
on the back of a rebounding manufacturing industry. However,
decisions to pass on price increases remain a key issue for
chemical companies amid rising raw material costs and worries that
profit growth may slow for the rest of the year. Demand from
emerging markets has been a key driver in the sector in recent
months.
COMPANIES TO WATCH
Air Products & Chemicals Inc. (APD) - reports July 22
Wall Street Expectations: Analysts polled by Thomson Reuters
expect earnings of $1.46 a share on revenue of $2.53 billion. In
the year-earlier period, Air Products posted a profit of $1.17 a
share, including an 11-cent tax charge, on revenue of $2.25
billion.
Key Issues: The industrial-gas maker has posted
expectation-beating results on increased volume in recent quarters
as its merchant gases business--its largest by revenue--continues
to grow in Asia. Air Products, which withdrew its $5.9 billion
hostile takeover offer for rival Airgas Inc. (ARG) earlier this
year, has had to raise prices to keep up with rising raw material
costs.
Praxair Inc. (PX) - reports July 27
Wall Street Expectations: Wall Street is looking for per-share
earnings of $1.37 on revenue of $2.79 billion. A year earlier,
Praxair posted a profit of $1.19 a share on revenue of $2.53
billion.
Key Issues: The largest industrial gas company in North and
South America posted a better-than-expected first-quarter profit on
double-digit sales increases in Asia and South America. Praxair has
reported growing earnings on revenue from emerging markets with
expanding oil-and-gas industries, such as Mexico and Brazil, in
recent quarters.
Dow Chemical Co. (DOW) - reports July 27
Wall Street Expectations: Wall Street analysts forecast
second-quarter earnings per share of 81 cents on revenue of $14.75
billion. A year earlier, the company posted a profit of 50 cents a
share, including a 4-cent restructuring charge, on revenue of
$13.62 billion.
Key Issues: The largest U.S. chemical producer by revenue has
posted eight consecutive quarters of margin growth as it places
greater emphasis on specialty chemicals and materials, which yield
bigger margins than commodity chemicals. The company has also seen
improved earnings in recent quarters as stronger demand and price
increases have offset higher purchased feedstock and energy costs.
Dow also repaid $2.5 billion in debt in the first quarter, a move
the company said will reduce interest expense and immediately boost
earnings.
DuPont (DD) - reports July 28
Wall Street Expectations: Analysts predict per-share earnings of
$1.34 on revenue of $9.86 billion. Last year, the company reported
a profit of $1.26 a share, which included a 9 cent charge, on
revenue of $8.62 billion.
Key Issues: DuPont closed its acquisition of Danish food
ingredients and enzymes company Dansico A/S (DNSCY, DCO.KO) in May,
enabling the U.S. manufacturer to further diversify from its
commodity chemical roots towards faster-growing product areas such
as high-tech seeds. The world's largest titanium dioxide producer
also announced a plan of more than $500 million to expand its
titanium dioxide manufacturing capacity as strong demand from
emerging markets continues to boost prices.
Airgas Inc. (ARG) - reports July 28
Wall Street Expectations: The Street is looking for 96 cents a
share in fiscal first-quarter earnings and revenue of $1.15
billion. In the year-earlier period, the company posted a profit of
76 cents a share, including a 7 cent charge, on revenue of $1.05
billion.
Key Issues: Airgas posted improving results over the past year
as industrial demand helped drive top-line results and enabled the
company to focus on improving metrics such as cylinder utilization.
The specialty-gas provider, which fended off a year-long hostile
approach from rival Air Products, posted a profit in the fourth
quarter on increasing sales to manufacturers and other
customers.
LyondellBasell Industries NV (LYB) - reporting date to be announced
Wall Street Expectations: Analysts predict LyondellBasell,
formed after the 2007 merger of Houston-based Lyondell and
Europe-based Basell, to post per-share earnings of $1.20 on revenue
of $13.27 billion. The year-earlier results aren't comparable as
the company emerged from Chapter 11 bankruptcy protection in April
2010.
Key Issues: LyondellBasell posted soaring first-quarter earnings
as the chemicals company reported improved results across its
business segments and improving margins, despite rising prices for
raw materials. The company has pointed to particular strength in
its olefins and polyolefins and propylene oxide businesses.
(The Thomson Reuters estimates and year-earlier figures may not
be comparable due to one-time items and other adjustments.)
-By Nathalie Tadena, Dow Jones Newswires; 212-416-3287; nathalie.tadena@dowjones.com
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