Air Products (APD) Clinches Industrial Gas Supply Contract

Air Products (NYSE:APD) has clinched a contract to supply industrial gases for the new memory fab of Fujian Jinhua Integrated Circuit Co., Ltd. (“JHICC”). The fab is located in the Fujian (Jinjiang) Integrated Circuit Industrial Park, Quanzhou City of Fujian Province, which has ample growth opportunities given its gradual development into a new integrated circuit (IC) industry base.

Air Products plans to build a state-of-the-art, energy-efficient nitrogen plant and leverage its current liquid bulk supply capability to supply a vast range of ultra-high purity gases, including nitrogen, oxygen, hydrogen, helium and argon, to meet the requirements of JHICC's fab.

Air Products remains committed to China's electronics industry and has been serving a number of world-leading and domestic manufacturers in the development of next generation electronics devices.

Air Products’ shares rose around 2.4% over the last three months, outperforming the Zacks categorized Chemicals-Diversified industry’s 2.1% gain.

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 witnessing 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.

Air Products beat earnings expectations in second-quarter fiscal 2017 (ended Mar 31, 2017). The company logged second-quarter adjusted earnings of $1.43 per share, up 4% from the year-ago quarter. Earnings surpassed the Zacks Consensus Estimate of $1.38. Revenues rose 11% year over year to $1.98 billion in the reported quarter, beating the Zacks Consensus Estimate of $1.83 billion.

Air Products has significant amount of cash to invest in its core industrial gases business. The company expects to have roughly $8 billion to deploy in strategic, high-return opportunities to create shareholders value over the next three years. For third-quarter fiscal 2017, Air Products anticipates adjusted earnings per share from continuing operations of $1.55 to $1.60 per share, which at midpoint, also represents a 9% increase over last year.

Air Products and Chemicals, Inc. Price and Consensus

Air Products currently carries a Zacks Rank #3 (Hold).

Stocks to Consider

Better-ranked companies in the chemical space include BASF SE (OTC:BASFY) , The Chemours Company (NYSE:CC) and Kronos Worldwide Inc (NYSE:KRO) . All the three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

BASF has expected long-term growth of 8.6%.

Chemours has expected long-term growth of 15.5%.

Kronos has expected long-term growth of 5%.

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