Air Products Reports in Line - Analyst Blog
October 21 2011 - 10:26AM
Zacks
Air
Products & Chemicals Inc. (APD) reported fourth quarter
2011 EPS of $1.51, versus $1.35 in the year-earlier quarter and
matched the Zacks Consensus Estimate of $1.51. For full year 2011,
the company reported an EPS of $5.73, up 14% year over year and
also matched the Zacks Consensus Estimate of $5.73.
Net sales
amounted to $2.6 billion, versus $2.4 billion in the prior-year
quarter, in line with the Zacks Consensus Estimate of $2.6 billion.
The improved results were mainly driven by growth in emerging
markets and strong performance in its Tonnage Gases business.
Despite a slowing global economy in the second half of 2011, the
company won several projects and also witnessed double digit sales
and earnings growth.
For fiscal
2011, sales increased 12% year over year to $10,082 million driven
by a 9% volume increase and were in line with the Zacks Consensus
Estimate.
Costs and
Margins
Cost of
sales increased to $1.9 billion in the reported quarter from $1.7
billion in the year-earlier quarter. Selling and administrative
expenses also increased to $257.5 million from $231.2 million in
the prior-year quarter.
The company
reported an operating profit of $425.3 million, increasing from
$367.0 million in the year-ago quarter.
Segmental
Performance
Merchant
Gases: Sales of the segment
increased 10% to $1,045.0 million from $948.0 million in the
year-ago-quarter based on higher volumes in Asia and U.S./Canada.
Operating income of the segment increased to $192.4 million from
$185.3 million in the prior-year quarter, mainly due to increased
volumes and positive pricing in Asia and U.S./Canada that were
offset by higher costs and lower Healthcare pricing in
Europe.
Tonnage
Gases: Sales of the segment rose
17.4% to $882.8 million from $751.7 million in the year-ago quarter
mainly because of higher volumes which were driven by new projects.
Operating income amounted to $151.7 million, up 30% from $117.0
million in the year-earlier quarter due to higher volumes, lower
costs and gains related to contract modifications.
Electronics and Performance
Materials: This segment reported sales
of $587.2 million, up 12% from $523.2 million in the year-ago
quarter, led by higher Electronics volumes and Performance
Materials pricing. Operating income increased by 9% to $91.5
million versus $84.0 million in the year-earlier
quarter.
Equipment and
Energy: Sales declined 25% to $95.8
million from $128.3 million in the prior-year quarter. The poor
performance is due to lower LNG and air separation unit activity.
Operating income also decreased substantially to $11.5 million from
$20.2 million in the year-ago quarter.
Financial
Position
Cash and
cash equivalents were $422.5 million as of September 30, 2011, up
from $374.3 million as of September 30, 2010.
Long-term
debt of the company increased to $3,927.5 million as of September
30, 2011 from $3,659.8 million as of September 30, 2011.
Discounted
Operations
A tax
benefit of 4 cents per share was recognized as income from
discontinued operations for the twelve months ended 30 September
2011 as it relates to the previously divested healthcare
business.
Outlook
Though the
near-term economic outlook looks bleak and has a lot of global
economic and policy uncertainties, Air Products remains confident
of its large backlog of projects backed by signed customer
contracts and remains committed to achieving its 2015 goals
for growth, margin, and return on capital.
The company
expects fiscal year 2012 EPS to be in the range of $5.90 to $6.30
per share, representing year-over-year earnings growth of 3% to
10%. For the first quarter of fiscal 2012 the company expects to
earn $1.31 to $1.39 per share.
The company
also forecasts capital spending in fiscal 2012 to be between $1.9
and $2.2 billion.
Airgas
Update
In February
2010, the company had made a tender offer to acquire all the
outstanding common stock of Airgas Inc.
(ARG), including the associated
preferred stock purchase rights, for $60.00 per share in
cash.
Airgas, a
Delaware company, is the largest U.S. distributor of industrial,
medical, and specialty gases, and hard goods. However, a year later
Air Products terminated the offer. For the twelve months ended
September 30, 2011, a net loss of $48.5 ($31.6 after-tax, or $.14
per share) was recognized related to this transaction.
We currently
have a Zacks #4 Rank (short-term Sell recommendation) on the
stock.
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.
AIR PRODS & CHE (APD): Free Stock Analysis Report
AIRGAS INC (ARG): Free Stock Analysis Report
PRAXAIR INC (PX): Free Stock Analysis Report
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