Reaffirming Air Products at Neutral - Analyst Blog
02 Maggio 2013 - 8:20PM
Zacks
We are retaining our Neutral rating on industrial gas giant
Air Products (APD) following our assessment of its
second-quarter fiscal 2013 (ended Mar 31, 2013) results. We
continue to tread with caution considering high energy costs,
volume pressure in the Merchant Gases division and weakness in the
electronics business.
Why Maintained?
Air Products’ second quarter earnings from continued operations of
$1.37 a share were in line with the Zacks Consensus Estimate.
Revenues rose 6% year over year to $2,484.2 million aided by
acquisitions, but missed the Zacks Consensus Estimate of $2,585
million. Management cut its earnings guidance for fiscal 2013
citing challenging economic conditions.
Air Products benefits from a diverse customer base, sustained
pricing power and cost-reduction measures. New business deals and
strategic investments are expected to support results in fiscal
2013.
Moreover, the acquisition of a 67% stake in Chilean industrial gas
company, Indura S.A., has ushered in substantial growth opportunity
for Air Products. We are also encouraged by the incremental
opportunities in liquefied natural gas (LNG) market. Air Products
has been chosen for a major off-shore LNG project in Malaysia,
representing a major opportunity for its LNG technology and
equipment.
Air Products has also embarked on headcount reduction, keeping a
tight control on expenses and undertaking work process improvement
initiatives. Moreover, it remains committed to maximize returns to
shareholders. Air Products’ Board, in Mar 2013, approved an 11%
hike in its dividend.
However, volume in the core Merchant Gases segment may remain under
pressure partly due to weakness across a number of markets in
Europe. Helium supply constraints remain another concern. Air
Products’ electronics business may also continue to see weak
demand.
Moreover, higher energy costs pose a threat to margin expansion. We
also take into account the company’s high debt level.
Other Stocks to Consider
Other companies in the chemical industry with favorable Zacks Rank
include Shin-Etsu Chemical Co., Ltd. (SHECY),
Celanese Corporation (CE) and Methanex
Corporation (MEOH). While Shin-Etsu Chemical retains a
Zacks Rank #1 (Strong Buy), both Celanese and Methanex hold a Zacks
Rank #2 (Buy).
AIR PRODS & CHE (APD): Free Stock Analysis Report
CELANESE CP-A (CE): Free Stock Analysis Report
METHANEX CORP (MEOH): Free Stock Analysis Report
SHIN-ETSU CHEM (SHECY): Get Free Report
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