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America: Air Products Shares Surge After Q3 Results

https://www.chemnet.com   Aug 03,2010
* Adj Q3 EPS $1.28 vs. Wall Street view $1.27


* Revenue up 14 percent


* Sees adj Q4 EPS $1.27 to $1.33


* Says won't enter bidding war for Airgas


* Shares up 3.1 percent


NEW YORK (Reuters) - Industrial gas supplier Air Products and Chemicals Inc, which has gone hostile in its bid for rival Airgas Inc., said its quarterly profit more than doubled, sending its shares up 3.1 percent.


The results came the day after Airgas posted much better-than expected earnings and rejected Air Products' latest offer of $63.50 per share as "grossly inadequate."


On a conference call with investors, Air Products Chief Financial Officer Paul Huck said his company remains convinced of the "strong strategic rationale" of the Airgas buyout. He added, though, that Air Products does not "need" Airgas and would not get into a bidding war.


While many see Airgas as a good fit for Air Products, some shareholders are wary that the company will pay a substantial premium.


"I think it makes good strategic sense for Air Products, but there will come a point where management has to say, 'We're not going to overpay,"' said Jeff Bagley, a portfolio manager at Haverford Quality Investing, which manages about 591,000 shares of Air Products. "I don't want them to bolster the bid all that much."


Thursday's results showed strong improvement in revenue at three of the four Air Products segments, with sales at the tonnage gas business, which supplies products used in the steel and chemical industries, jumping 28 percent.


Revenue in the equipment and energy business fell only slightly, and sales at the electronics and performance materials unit are back to pre-recession levels, the company said.


"Our continued improvements in margin, earnings growth and return on capital show that we remain focused on delivering the value our shareholders expect," Air Products Chief Executive Officer John McGlade said.


Air Products shares rose $2.20, or 3.1 percent, to $72.26 in midday trading.


"I thought it was an overall good report," said Bagley, the portfolio manager. "Air Products is a really undervalued story. ... This is a pretty strong story in terms of participation in the global economic recovery."



BY THE NUMBERS


For the third quarter ended June 30, the company reported net income of $253.2 million, or $1.19 per share, compared with $113.2 million, or 54 cents per share, a year earlier.


Excluding charges from the Airgas bid, the Lehigh Valley, Pennsylvania-based company earned $1.28 per share. By that measure, analysts expected $1.27, according to Thomson Reuters I/B/E/S.


Revenue rose 14 percent to $2.25 billion. Analysts expected $2.29 billion.


For the fourth quarter, the company expects adjusted earnings of $1.27 to $1.33 per share. Analysts expect $1.33.



Air Products said foreign currency conversion rates should clip earnings by about 5 cents per share this fiscal year.


Overall, the results and forecast show that Air Products should be "well positioned in a choppy recovery," said Jefferies & Co analyst Laurence Alexander, who kept a "buy" rating on the stock.
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