EARNINGS PREVIEW: US chemical companies still face macro hurdles
By VICTORIA STILWELL
TAKING THE PULSE: Domestic chemical producers face tough demand conditions, with weak export markets trumping the advantage afforded by cheap natural gas. Ethylene prices have slumped, and specialty markets are also struggling as European auto sales trend lower and consumer electronics remains patchy.
COMPANIES TO WATCH:
Air Products & Chemicals - reports July 24
Wall Street Expectations: Analysts polled by Thomson Reuters expect a profit of $1.41/share on revenue of $2.46 billion. A year before, Air Products saw earnings of $1.50/share on revenue of $2.58 billion. The results included a 4 cent/share gain in discontinued operations on a tax benefit.
Key Issues: Investors will be watching the industrial gas company's performance closely as it may face headwinds from more exposure in the electronics market than its rival Praxair, as well as a significant position in the struggling European market.
The company in April predicted it would enter the second half of the year with lower levels of business activity but said earnings and sales growth would pick up into 2013.
DuPont - reports July 24
Wall Street Expectations: Analysts surveyed by Thomson Reuters predict a profit of $1.46/share on revenue of $11.25 billion. A year earlier, DuPont posted per-share earnings of $1.29, or $1.37 excluding acquisition expenses, on total revenue of $10.26 billion.
Key Issues: DuPont, a diversified US manufacturer, has seen its agriculture segment perform well despite economic headwinds. However, Jefferies this month cut its 2012 and 2013 views and downgraded DuPont to hold to reflect weaker demand in Europe and "incremental deterioration" in the titanium-dioxide industry.
DuPont rebuffed industry commentary, reaffirming its full-year and long-term outlook for titanium dioxide.
Praxair - reports July 25
Wall Street Expectations: Analysts forecast earnings of $1.43/share on revenue of $2.93 billion. Praxair posted per-share earnings of $1.38 on revenue of $2.86 billion a year before.
Key Issues: The largest industrial gas company in the Americas in April forecast it will continue to benefit from low natural gas costs in its chemical and energy sectors. Praxair said it also expects growth in the South American and Asia markets amid greater demand and infrastructure investment, however manufacturing may see challenges domestically as the sector shows some signs of weakness.
Dow Chemical - reports July 26
Wall Street Expectations: Analysts predict earnings of 64 cents/share on revenue of $15.74 billion. A year earlier, Dow posted per-share earnings of 84 cents, or 85 cents excluding a loss on early extinguishment of debt and other items, on $16.05 billion of revenue.
Key Issues: Agriculture is expected to be a notable performer, though plastics may see weaker volumes in Europe and Asia. Dow said it is poised for global growth through the rest of the year as demand picks up in the US and as China encourages domestic growth.
J.P. Morgan downgraded the company to neutral, saying it had more relative earnings vulnerability this year versus its peers. The firm noted Dow faces margin pressure from weakness in its specialty product lines and is exposed to cyclical economic threats.
LyondellBasell - reports July 27
Wall Street Expectations: Analysts forecast a profit of $1.41/share on revenue of $13.03 billion. LyondellBasell saw per-share earnings of $1.38 in the year-ago period, which included 11 cents in restructuring-related and other charges, on $14.04 billion in revenue.
Key Issues: LyondellBasell said in April comparatively low natural gas prices in the US will likely keep domestic ethylene manufacturers competitive relative to their global peers, though European market weakness and high costs are still cause for concern.
Macquarie raised the country to outperform and said that while the second-quarter earnings season may be choppy, the company should do well in the second half of the year.
(The Thomson Reuters financial estimates and year-earlier figures may not be comparable due to one-time items and other adjustments.)
Dow Jones Newswires