Airgas Misses Estimates

Zacks

Airgas Inc. (ARG) posted adjusted earnings of $1.05 a share in second-quarter of fiscal 2013 (ended September 30, 2012), at the lower end of the management guidance of $1.05 -$1.09 and comared with $1.03 recorded in the year-ago quarter. The results missed the Zacks Consensus Estimate of $1.06. Including restructuring charges, earnings per share in the quarter stood at $1.05 compared with $1.03 in the year ago quarter.

Revenues

Revenues in the reported quarter rose 4% year over year to $1,229.6 million, missing the Zacks Consensus Estimate of $1,253 million. Same-stores sales were up 3%, with hardgoods gaining 1% and gases and rent growing 4%.

Cost and Margins

Costs of goods sold remained flat at $552.3  million in the quarter. Selling, distribution and administrative expenses amounted to $458.3 million, up 8% year over year.

Adjusted operating income was $147.6 million in the quarter versus $144.6 million in the year-ago quarter. Adjusted operating margin in the reported quarter was 12% compared with 12.2% in the prior year quarter.

Financial Position

Cash, as of September 30, 2012, amounted to $47.9 million, compared with $54.9 million as of June 30, 2012. Free cash flows during the first half of fiscal 2013  went up to $121 million from $105 million last year. Adjusted cash from operations for the first half of fiscal 2013 was $277 million versus $257 million in the prior-year period.

Airgas also announced a share repurchase program of up to $600 million of its outstanding shares of common stock. As of October 22, 2012, Airgas had approximately 77.3 million common shares outstanding.

Outlook

Management expects adjusted earnings per share (excluding one-time items) for the third quarter of fiscal 2013 to increase 8% to 14% to a range of $1.05 to $1.11. The guidance take into account year-over-year decline of 3 cents from the impact of lower sales due to helium supply constraints, as well as 1 cent to 2 cents of SAP implementation costs and depreciation expense, net of expected benefits, compared to 10  cents in the prior year.

For fiscal 2013, the company expects adjusted earnings per share (excluding one-time items) to increase 8% to 12% to the range of $4.45 to $4.60 from $4.11 in fiscal 2012, including an anticipated impact of 12 cents to 16 cents related to SAP implementation costs and depreciation expense.

Adjusted earnings guidance also incorporates a decline of 3 cents year over year due to lost sales because of helium supply constraints. The outlook reflects two less selling days in fiscal 2013.

The company is focusing on implementing SAP across its distribution channel with nearly 70% of the business already running on SAP. Airgas remains confident that SAP implementation will enable it to realize its full economic benefits and help it to serve its customers better.

Pennsylvania-based Airgas, through its subsidiaries, distributes industrial, medical and specialty gases, as well as hard goods in the U.S. The company competes with Air Products & Chemicals Inc. (APD) and American Air Liquide, Inc.

Airgas currently retains a Zacks #4 Rank, which translates into a short-term (1 to 3 months) Sell rating.

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