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Airgas Announces Pricing Actions

Zacks Equity Research

Airgas, Inc. (ARG) declared that its operating units effective Jul 1, 2013 will increase the prices of various products and gases to combat rising costs on multiple fronts including product costs, labor and benefits.

The price hike of 6% – 12% will be implemented on bulk and packaged industrial, medical, and specialty gases and 10% – 15% on helium and argon. Welding hardgoods and safety products prices of the company will be hiked by 3% – 6%. The delivery and other service fees will also be adjusted.

Rental rates on cylinder and bulk tank of Airgas will also be increased by 6% – 12% effective from Jun 1, 2013, or as contracts permit. Supply and demand imbalances for some products are driving up production and distribution expense. The price rise has also been driven by the escalation in natural gas and power costs.

Airgas will mitigate rising costs by investing in infrastructure and technologies. This will help the company to serve its customers efficiently, ensuring reliability on the supply chain and safety practices. The price increase will aid its second quarter fiscal 2014 earnings.

Airgas’ fourth-quarter 2013 earnings per share of $1.14 increased 3% from $1.11 earned in the year-ago quarter. Disappointing organic sales growth in the Distribution segment arising from weak volume in both gases and hardgoods affected results in the quarter. However, despite the soft economy, Airgas reported record earnings per share of $4.35 in fiscal 2013, up 6% over the prior year.

For fiscal 2014, Airgas projects earnings in the range of $5.00 to $5.35, projecting a 15% to 23% annual growth. Even though results will bear the brunt of the weak business conditions in the first half of fiscal 2014, it will improve in the latter half. This will lead to low-to-mid single-digit organic sales growth for the full year, with gas and rent outpacing hardgoods.

Airgas’ strong brand identity, size and scale advantage, an extensive U.S. distribution network and a diverse customer base position the company for sustainable long-term growth. Furthermore, acquisitions, share buybacks and SAP implementation will provide a solid tailwind, going forward.

Radnor, PA-based Airgas through its subsidiaries, distributes industrial, medical and specialty gases as a well as hardgoods in the U.S. The company also markets its products and services through e-business, catalog and telesales channels.

Airgas currently retains a short-term Zacks Rank #4 (Sell).

Celanese Corporation (CE), Methanex Corporation (MEOH) and Shin-Etsu Chemical Co., Ltd. (SHECY) belong to the same industry where Airgas operates. Each of them holds a Zacks Rank #1 (Strong Buy).

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Read the Full Research Report on MEOH

Read the Full Research Report on CE

Read the Full Research Report on SHECY

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