Back to top

Image: Bigstock

Air Products (APD) Wins Long-Term Hydrogen Supply Contract

Read MoreHide Full Article

Air Products (APD - Free Report) announced that it has been awarded with a long-term supply contract for supply of around 30 million standard cubic feet per day of hydrogen by Marathon Petroleum Company LP for its refinery in Garyville, LA.

Marathon Petroleum Company LP, a fully-owned subsidiary of Marathon Petroleum Corporation, is not only one of the largest petroleum refiners in the U.S. but is also the largest in the Midwest. This supply deal which is expected to begin in Nov 2017 is an addition to the volumes of hydrogen that Air Products already provides Marathon at its Garyville refinery.

Air Products is a reliable supplier of hydrogen for Marathon Petroleum – a long-term customer. In addition to Garyville, Air Products also supplies hydrogen to Marathon at several of their refineries in the  U.S. Hydrogen is used in petroleum refining processes to remove impurities found in crude oil thus making it an important component for the production of cleaner burning transportation fuels.

The additional hydrogen will be provided from Air Products' existing Gulf Coast Pipeline. The company’s Gulf Coast Pipeline (GCP) is the world's largest hydrogen plant and pipeline network system and also serves as an additional value-added source of reliable product supply. The 600-mile long network of pipeline stretches from the Houston Ship Channel in Texas to New Orleans, LA. It provides customers with over 1.4 billion feet of hydrogen per day from over 22 hydrogen production facilities. The GCP delivers safe and considerable amount of hydrogen to the refinery and petrochemical industries around the world.

Air Products has underperformed the Zacks categorized Chemicals-Diversified industry over the past three months, bearing the brunt of the headwinds. The company’s shares have declined around 2.5% over this period, compared to roughly 6.7% gain recorded by the industry.



Air Products is well positioned to capitalize on the cyclical recovery in core industrial end-markets. The company has built a strong project backlog. These projects are expected to be accretive to earnings and cash flow over the next few years. Acquisitions and new business wins are expected to continue to drive results in the near term. The company is also progressing well with its $600 million cost-cutting program.

However, Air Product’s industrial gases business in the EMEA region is seeing pressure from a weak operating environment. The company is also seeing lower volumes in Latin America due to weak demand. Moreover, volumes in packaged gases continue to be weak while LNG sales remain under pressure due to low project activity. The company is also exposed to currency headwinds and has a debt-laden balance sheet.

Air Products missed earnings expectations in first-quarter fiscal 2017 (ended Dec 31, 2016). The company logged first-quarter adjusted earnings of $1.47 per share, up 9% from the year-ago quarter. However, earnings missed the Zacks Consensus Estimate of $1.48. Revenues inched up 1% year over year to $1.88 billion in the reported quarter but missed the Zacks Consensus Estimate of $1.96 billion.

For second-quarter fiscal 2017, Air Products expects adjusted earnings from continuing operations of $1.30 to $1.40 per share. Air Products also expects adjusted earnings for fiscal 2017 in the range of $6.00 to $6.25 per share, up 9% year over year at the midpoint. The company expects capital expenditures of roughly $1 billion in fiscal 2017.

Air Products and Chemicals, Inc. Price and Consensus

 

Air Products currently carries a Zacks Rank #4 (Sell).

Key Picks

Better-ranked companies in the chemical space include Univar Inc. , The Chemours Company (CC - Free Report) and Albermale Corporation (ALB - Free Report) .

Univar has an expected long-term growth of 9.4% and sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Chemours has an expected long-term growth of 15.5% and carries a Zacks Rank #2 (Buy).

Albemarle has an expected long-term growth of 10% and has a Zacks Rank #2.

The Best Place to Start Your Stock Search

Today, you are invited to download the full list of 220 Zacks Rank #1 "Strong Buy" stocks – absolutely free of charge. Since 1988, Zacks Rank #1 stocks have nearly tripled the market, with average gains of +26% per year. Plus, you can access the list of portfolio-killing Zacks Rank #5 "Strong Sells" and other private research. See these stocks free >>


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


Air Products and Chemicals, Inc. (APD) - free report >>

Albemarle Corporation (ALB) - free report >>

The Chemours Company (CC) - free report >>

Published in