The Rising Influence of Rising Affluence

[DewDiligence]

APD Shares Fall on FY4Q11 Forecast

[The 4% selloff following this earnings release provides a good entry point, IMO, insofar as the company’s 2015 forecast in #msg-64095618 remains unchanged. APD actually raised the lower bound of its FY2011 EPS guidance from $5.65 to $.70; however, the market treated this as a negative because APD left the upper bound of the range unchanged at $5.75. More important, APD maintained its 2015 outlook presented in #msg-64095618.

Please see #msg-46518659 for a dated but still accurate description of how APD ties in with The Global Demographic Tailwind. Also see #msg-46518659 for how APD participates in the global LNG buildout.]

http://www.reuters.com/article/2011/07/22/airproducts-idUSN1E76J0OX20110722

›Jul 22, 2011 12:09pm EDT
By Ernest Scheyder

NEW YORK, July 22 (Reuters) - Operational challenges and higher costs hampered Air Products and Chemicals Inc's (APD) quarterly profit and led executives to forecast a tepid fiscal fourth quarter, pushing the company's stock down 2.4 percent. [The stock closed Friday down 3.7%.]

Air Products, which supplies argon, oxygen and other industrial gases to retail, manufacturing and construction customers, said its operations in North America remain the weakest, hurt by lackluster consumer demand and uncertainty about U.S economic policy.

"The economy in North America has kind of hit a soft patch," Chief Financial Officer Paul Huck said on a conference call with reporters. "There's still a lot of uncertainty around there."

Asian growth remains strong, and the company plans to increase its capital spending there, Huck said.

Planned customer plant shutdowns during the fiscal third quarter dented Air Products' tonnage business, which operates industrial gas facilities on-site for customers.

Higher costs ate into the merchant business, which supplies industrial gas for retail and construction customers.

Chief Executive John McGlade said he was "very disappointed" about the weak performance.

"With the Tonnage planned maintenance outages behind us and the actions we are taking to improve Merchant performance, we expect margins to improve significantly" in the current quarter, McGlade said in a statement.

Mixed results could continue, the company said. Air Products forecast a profit of $1.48 to $1.53 per share for the current quarter. Analysts expect $1.52.

"As uncertainties surrounding policy, fiscal and sovereign debt issues begin to resolve over the coming months, we would expect growth to pick up early in our fiscal 2012," said Huck.

For the third quarter, ended June 30, the company posted net income of $326.5 million, or $1.50 per share, compared with $253.2 million, or $1.17 per share, a year earlier.

Excluding a gain from the sale of its healthcare business in 2009, Air Products earned $1.46 per share. That met analysts' expectations, according to Thomson Reuters I/B/E/S.

Revenue rose 15 percent to $2.58 billion. Analysts expected $2.53 billion.

Sales to electronics customers showed the fastest growth, up 21 percent to $602 million. The electronics segment, which supplies gases that Apple Inc (AAPL) and Intel Corp (INTC) use to make their popular products, should continue to grow, Huck said.

"We expect continued strong performance from this segment," he said.

Shares of Air Products were down 2.4 percent to $93.16 in midday trading. The stock has traded between $69.89 and $98.00 in the past 52 weeks.‹