Air Products: Leveraged to Strengthening US Economy

Our NY presenter believes Air Products and Chemicals (NYSE: APD, $74.55) is a good value at the current level. Volumes are picking up in the company's core onsite gas business. 40% of the company's contracts are long-term, take or pay agreements, guaranteeing a certain level of output sold. APD is expanding into multiple growth areas. There are solid signs of growth in emerging markets, particluarly in Asia. The company had its $60/share all cash offer for Airgas rejected by ARG board, but the presenter believes the deal will go through later this year. Other competitors are not likely to enter a bidding war. If the merger takes place, 60% of APD's business will be domestic, and thus leveraged to the upside in the US Economy in 2011-2012. His target is $90 based on 15 times FY 2011 earnings.