APD Air Products and Chemicals Inc

Effective January 01, 2012, Air Products & Chemicals Inc. (APD) would increase the prices of all electronics materials and electronic formulated products in North America by 3.5% to 15% driven by to an increase in production costs.

Moreover, Air Products also intends to eliminate rental discounts on these products.

Recently, Air Products reported its fourth-quarter 2011 EPS of $1.51 versus $1.35 in the year-earlier quarter, in line with the Zacks Consensus Estimate of $1.51. For full-year 2011, the company reported EPS of $5.73, up 14% year over year, in line with 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 the 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, which was in line with the Zacks Consensus Estimate.

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 use. 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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