APD Air Products and Chemicals Inc

Air Products & Chemicals Inc. (APD) will display its PolarFit industrial gas-based technologies and process improvement solutions at this year's Rubber Expo in Cleveland, Ohio, from October 11-13.

Air Products is a recognized leader in cryogenic technology. Cryogenic air separation is a preferred technology for producing very high purity oxygen and nitrogen. It is the most cost effective technology for high production rate plants. All plants producing liquefied industrial gas products utilize cryogenic technology.

In July 2011, the company reported third-quarter fiscal 2011 EPS of $1.46 versus $1.17 in the year-earlier quarter, matching the Zacks Consensus Estimate of $1.46. The results exclude a 4-cent gain in discontinued operations recognizing a tax benefit from the sale of the company's U.S. healthcare operations in 2009.

Net sales amounted to $2.6 billion versus $2.3 billion in the prior-year quarter, moving ahead of the Zacks Consensus Estimate of $2.5 billion. The improved results were mainly driven by higher volumes in the Electronics and Performance Materials and Tonnage Gases segments.

The company witnessed strong volume growth across a number of businesses mainly in the Asia Merchant business and the energy and electronics markets. However, the U.S. and Europe Merchant businesses witnessed slower growth.

For the quarter ahead, the company forecasts strong revenue growth in the Tonnage, and Electronics and Performance Materials segments. The company also expects to improve margins in the next quarter based on its actions to improve Merchant segment performance.

Management expects fourth-quarter EPS between $1.48 and $1.53. The company raised the full fiscal year EPS guidance between $5.70 and $5.75 per share from $5.65 and $5.75 previously.

Last month, the company also announced new financial targets for the 2015 timeframe. The company expects to deliver top-line growth of 11% to 13% per year over the next four years, which would boost its total revenue to over $15 billion in 2015. Air Products also expects to improve its operating margin to 20% and its return on capital to 15% by 2015.

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 manufactures for industrial users. Air Products faces stiff competition from Praxair Inc. (PX) and The Linde Group.

We currently have a Zacks #3 Rank (short-term Hold recommendation) on the stock.

 
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