Air Products and Chemicals Inc.APD

Morningstar Rating

Stock Research and Analysis

by Basili Alukos, CPA

In the profitable on-site industrial-gas business, long-term contracts and pricing power are instrumental in creating economic profits. With its leading hydrogen position and cost-cutting initiatives, we think on-site industry pioneer Air Products is Read more

Bulls Say

An intensified focus on selling underperforming businesses within the poor-performing chemical segment, including the recent sale of its nonpressure emulsion business, has turned Air Products into a more profitable company.

Most of the world's incremental oil production will probably come from heavy crude. This should drive increased purchases of hydrogen, which is used to reduce sulfur content during the refining process.

The industrial-gas industry has recently been marked by capital discipline and consolidation, resulting in better pricing power and returns on capital. Read more

Bears Say

Air Products has exposure to end markets that can exhibit sharp cycles, namely electronics. With lower margins and returns, electronic sales could erode the company's overall performance amid uncertain economic times.

Recent shortages of argon and helium limited Air Products' ability to supply existing customers and to expand business to prospective clients. With near-term expectations for these shortages to persist, profitability may suffer.

Undisciplined capital spending in the mid-1990s resulted in excess capacity and a weak pricing environment. Although this situation has vastly improved, it may only be a matter of time before history repeats itself. Read more

Strategy

Air Products is targeting high-growth end markets such as electronics, health care, and energy to supplement its leading hydrogen position. Its recent development to use oxygen in reducing carbon dioxide Read more

Management

President and CEO John McGlade started his career with Air Products in 1976. During his tenure, McGlade worked in multiple areas, including as president of both the chemical and process industry and the performance material division. Before becoming Read more

Profile

Established in 1940, Air Products pioneered the on-site production concept and used this invention to become the world's largest supplier of hydrogen and helium. Serving Read more

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