By Ben Fox Rubin Of DOW JONES NEWSWIRES TAKING THE PULSE: A shaky global economy and lighter demand have hurt a number of U.S. chemical companies, causing several of them to warn of weaker upcoming earnings. Most notably, DuPont Co. (DD) said more customers are drawing down their inventories instead of buying more products, a problem that is expected to resonate throughout the chemicals sector. Chemical companies had been buoyed by cheap feedstock as shale gas expansion has driven down input costs, and emerging markets remain a key driver for growth. Construction-related business and materials for consumer products have been the weakest spots. Mergers and acquisitions have picked up, so capital and excess profit allocation will be another key focus. COMPANIES TO WATCH: Air Products & Chemicals Inc. (APD) - reports Jan. 24 Wall Street Expectations: Wall Street forecasts a fiscal first-quarter profit of $1.36 a share on revenue of $2.53 billion. A year earlier, the company's per-share profit was $1.23, or $1.35 excluding charges tied to its failed takeover bid for rival Airgas Inc. (ARG), on $2.39 billion in revenue. Key Issues: The specialty-gas supplier and chemical maker warned of softer first-quarter results on economic uncertainty but said it was well-positioned with a large backlog of projects. This month, the company agreed to sell its continental European home care business to Linde AG (LNEGY, LIN.XE) for EUR590 million ($750.7 million) as it looks to focus on its core gases business. It is also evaluating options for its remaining home care interests in the U.K., Ireland, Argentina and Brazil. Air Products has seen double-digit earnings growth and higher volume recently thanks to Asian demand, and the company hopes to continue that momentum with stepped-up investments in China and India. DuPont Co. (DD) - reports Jan. 24 Wall Street Expectations: Analysts predict a profit of 33 cents a share on $8.53 billion in revenue. A year earlier, DuPont posted a profit of 40 cents a share, or 50 cents excluding special items, on total revenue of $7.74 billion. Key Issues: DuPont, a diversified U.S. manufacturer, repeatedly warned of a weaker fourth quarter and recently lowered its profit guidance for 2011, citing nagging uncertainty in the global economy forcing its customers to work down their inventories instead of buying more products. DuPont was among the first companies to highlight the practice, known as destocking, in the fall as customers trimmed inventories, though the declines are far less dramatic than seen at the start of the past recession. The company last month forecast 2012 earnings largely above market estimates, signaling hope for the manufacturing sector's prospects. Praxair Inc. (PX) - reports Jan. 25 Wall Street Expectations: Praxair's fourth-quarter profit is expected to be $1.37 a share, with revenue of $2.84 billion. A year earlier, it posted a profit of 43 cents a share, or $1.25 excluding an income-tax settlement charge, on $2.62 billion in revenue. Key Issues: Praxair, the largest industrial gas company in North America and South America, has maintained better earnings on recent strength in Asia and South America, though North America remains its biggest market, making up about half its sales. The company continued to see strong earnings growth in its third quarter, as it posted double-digit revenue increases across all geographic regions. Airgas Inc. (ARG) - reports Jan. 26 Wall Street Expectations: Analysts surveyed by Thomson Reuters anticipate a fiscal third-quarter profit of 97 cents a share on $1.14 billion in revenue. For the same quarter last year, Airgas earned 65 cents a share, or 80 cents a share excluding takeover-related costs and other items, with $1.03 billion in revenue. Key Issues: Airgas has increased its customer base and reported recent double-digit profit gains, thanks to a boost in industrial activity. The company, which supplies canisters of oxygen, argon and other gases to various industries, raised its full-year profit forecast in October. Peter McCausland, its founder and chief executive, took back control of the company's chairmanship last year after rival Air Products helped install a new chairman during a hostile takeover bid. Air Products eventually withdrew its $5.9 billion offer. Dow Chemical Co. (DOW) - reports Feb. 2 Wall Street Expectations: Dow Chemical is expected to have earned 30 cents a share on $14.19 billion in revenue for the fourth quarter. A year earlier, it reported a profit of 37 cents a share on revenue of $13.77 billion. Excluding restructuring charges and other items, earnings a year earlier were 47 cents a share. Key Issues: The largest U.S. chemicals company by revenue has seen its income soar in recent quarters as the company continues to shift away from business in lower-margin commodities. Stronger demand in emerging markets and price increases also have aided Dow Chemical, which makes chemicals used in items ranging from diapers to auto industry products. In November, the company officially formed its joint venture Sadara Chemical Co. with Saudi Arabian Oil Co., also known as Saudi Aramco. The venture plans to build and operate one of the world's largest chemical plants on oil-rich kingdom Saudi Arabia's Persian Gulf coast. Production is expected to begin in 2015, and all units should be up and running by 2016. (The Thomson Reuters financial estimates and year-earlier figures may not be comparable due to one-time items and other adjustments.) -By Ben Fox Rubin, Dow Jones Newswires; 212-416-3108; ben.rubin@dowjones.com
