Back to top

Analyst Blog

Zacks Equity Research

Air Products Slips to Underperform

PX APD

 ZacksTrade Now

This page is temporarily not available.  Please check later as it should be available shortly. If you have any questions, please email customer support at support@zacks.com or call 800-767-3771 ext.  9339.

We are downgrading our rating on Industrial gas giant Air Products and Chemicals Inc. (APD - Analyst Report) to Underperform factoring in the challenges it may face in fiscal 2013. Adjusted earnings (from continued operations) of $1.42 a share for fourth-quarter fiscal 2012 missed the Zacks Consensus Estimate by a couple of cents. Profit, as reported, slid 57% year over year on account of hefty impairment charges related to the restructuring of the company’s photovoltaic business.

Revenues, however, rose 4% year over year to $2,606 million and beat the Zacks Consensus Estimate. The company witnessed sluggish manufacturing activity in the quarter. Management’s guidance for fiscal 2013 reflected economic uncertainty and depressed growth.

Air Products benefits from a long-term take-or-pay contract, a consolidated industry structure, diverse customer base and sustained pricing power. The company’s healthy project backlog strongly positions it to achieve its long-term growth target.

New business wins in the Merchant Gases segment should support results in fiscal 2013. Moreover, Air Products continues with its global cost reduction plan. The company is also offering healthy returns to its shareholders in the form of incremental dividends.

However, sluggish economic conditions across the U.S. and Europe may continue to impact the demand for the company’s products. Volume in the Merchant Gases division is expected to remain under pressure, partly due to the recessionary conditions in Europe.

Moreover, the Electronics and Performance Materials segment is expected to witness lower seasonal demand in first-quarter fiscal 2013 while profits are expected to fall in the Tonnage Gases division due to lower volume and higher maintenance spending. Sluggish U.S. manufacturing growth due to high unemployment and the concerns over the U.S. fiscal cliff coupled with the slowdown in Asia is expected to impinge results in fiscal 2013.

In addition, currency headwinds and pension expenses are expected to weigh on earnings moving ahead. Air Products generates a considerable amount of revenues outside the U.S., and therefore, remains exposed to foreign exchange fluctuations. Higher energy costs also pose a threat to margin expansion. These factors are reflected in our rating revision on the stock.

Air Products, which competes with Praxair Inc. (PX - Analyst Report) among others, currently retains a Zacks #4 Rank, which translates into a short-term Sell rating.

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

Learn more

Start for as little as $4.50 per trade.

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
DIXIE GROUP DXYN 15.84 +7.90%
BOFL HOLDING BOFI 85.30 +4.97%
RAMBUS INC RMBS 12.31 +4.41%
VIPSHOP HOLD VIPS 148.73 +4.35%
NETFLIX INC NFLX 345.74 +4.32%