The Zacks Analyst Blog Highlights:The Kroger, Costco Wholesale, Wal-Mart Stores, Air Products and Chemicals and Praxair

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Sep 17, 2012, 09:30 ET

CHICAGO, Sept. 17, 2012 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include The Kroger Company (NYSE:KR), Costco Wholesale Corporation (Nasdaq:COST), Wal-Mart Stores Inc. (NYSE:WMT), Air Products and Chemicals Inc. (NYSE:APD) and Praxair Inc. (NYSE:PX).

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Here are highlights from Friday's Analyst Blog:

Kroger Enhances Dividend Payout

In a move to enhance shareholders' return, The Kroger Company (NYSE:KR) – one of the largest grocery retailers – recently increased its quarterly dividend by about 30% bringing the annualized payout to 60 cents per share from the earlier level of 46 cents.

The quarterly dividend, after the hike, will come to 15 cents per share, up from the prior payment of 11.5 cents per share. The increased quarterly dividend will be payable on December 1, 2012, to shareholders of record as on November 15, 2012.

This is the sixth consecutive annual increase in Kroger's quarterly dividend since it reinstated dividend payment in the year 2006 at the rate of 6.5 cents per share. Its prior dividend increase was made on September 15, 2011, when the company had increased its quarterly dividend by 9.5% to 11.5 cents per share compared with its previous payout of 10 cents per share.

In May, 2012, its close peer –Costco Wholesale Corporation (Nasdaq:COST) – also increased the quarterly dividend by 14.6% to 27.5 cents per share from the earlier level of 24 cents.

Kroger's dividend increase reflects its focus on cash deployment. Besides paying a competitive dividend, the company's deployment strategy includes stock buybacks. In the second quarter of 2012, the company repurchased 23.7 million shares of its common stock for approximately $525 million.

Management believes that Kroger has the capability of generating healthy free cash flow and operating results. Moreover, the company's move to increase dividend signifies its focus on 'Customer 1^st Strategy' proving better returns to the stakeholders.

Overall, Kroger is actively managing its capital resources through returning much of its free cash to shareholders via share buybacks and dividends. Moreover, management continues to deploy capital to concentrate more on remodels, merchandising.

On September 7, 2012, the company reported better-than-expected second-quarter 2012 results. Quarterly earnings of 51 cents per share increased 24.4% compared with 41 cents per share in the second-quarter of 2011. Kroger results also exceeded the Zacks Consensus Estimate by a couple of cents. Total revenue (including fuel center sales) also climbed 3.9% to $21,726.4 million from the prior-year quarter, but fell short of the Zacks Consensus Estimate of $21,983 million.

However, we believe that these positives will be offset by recent economic downturn and heavy job losses, which have transformed the way consumers used to shop. Cash-strapped consumers are now prioritizing their purchases, trading down to cheaper substitute brands and shopping for groceries at low-price leaders like Wal-Mart Stores Inc. (NYSE:WMT) and Costco.

The company presently retains a short-term Zacks #2 Rank (Buy) for the next 1-3 months on the basis of company's healthy second-quarter results and continued dividend increases. However, we retain our long-term 'Neutral' recommendation on the stock.

Air Products Expands in China

Air Products and Chemicals Inc. (NYSE:APD) announced the acquisition of an Air Separation Unit (ASU) and integrated gases liquefier in Guiyang, China, from Guizhou Kaiyang Chemical Co. Ltd. Guizhou Kaiyang Chemical is a subsidiary of the Yankuang Group, a state owned coal-mining company in China.

The ASU is expected to produce about 2,000 tons per day (TPD) of gaseous oxygen and nitrogen, which will be supplied to Guizhou Kaiyang Chemical's coal to ammonia conversion plant. Meanwhile, the liquid gas will be supplied to industries in Guiyang, with some portion being sold to Guizhou Kaiyang Chemical. Both the ASU and the liquefier are expected to come online next month.

This is the second contract that Air Products has signed with a Yankuang Group member. Air Products already has a contract with another Yankuang Group member, Shaanxi Future Energy Chemical Co., Ltd., in Yulin, Shaanxi Province. The company plans to operate the largest on-site ASU under the contract. Shaanxi's coal chemical plant will become operational from 2014 and expects to produce 12,000 TPD of oxygen and significant volumes of nitrogen and compressed dry air.

Recently, Air Products also struck a deal with Jinxin Glass in Jiyuan, located in Henan Province in China, to supply its integrated oxy-fuel solution. The supply will help in reducing emissions in the glass melting process as it will replace the conventional air-fuel combustion.

In July 2012, Air Products released its third-quarter results for fiscal 2012 ended June 30, 2012. The company reported adjusted (excluding one-time items) earnings from continued operations of $1.41 a share for the quarter, in line with the Zacks Consensus Estimate.

Consolidated net income, as reported, surged 48% year over year to $484.5 million or $2.26 a share compared with $326.5 million or $1.50 a year ago. The increase in profit was attributable to lower costs and one-time gains, which more than offset the impact of lower sales.

Revenues dipped 5% year over year to $2,340.1 million, missing the Zacks Consensus Estimate of $2,455 million. Challenging conditions in Europe and Asia as well as unfavorable currency due to a stronger dollar weighed on the company's top line in the quarter.

Air Products' healthy project backlog and solid bidding activity strongly positions it to achieve long-term growth target. Given its leading position in the gases business, the company is well positioned to capitalize on the cyclical recovery in its core industrial end markets. Further, new business deals are expected to boost its profits in 2012. However, soaring energy and raw material costs pose a threat to margin expansion.

Air Products, which competes with Praxair Inc. (NYSE:PX), has a short-term Zacks #3 Rank (Hold) currently and we have a long-term Neutral recommendation on its shares.

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