APD Air Products and Chemicals Inc

Airgas Inc. (ARG) has signed a five-year supply agreement with Milwaukee, Wisconsin-based Johnson Controls Inc. (JCI). Under the agreement, Airgas will supply Johnson Controls with refrigerant gas, bulk and packaged industrial gas, welding hardgoods and related products, and personal protection equipment.

Johnson Controls is a supplier of automotive interiors, batteries and other control equipment. The company functions through three segments: Automotive Experience, Building Efficiency and Power Solutions.

The Airgas-Johnson Control association is already well entrenched. Airgas has been providing refrigerant gases, packaged gases, welding hardgoods and personal protection equipment safety products to various Johnson Controls locations for a number of years. The new agreement further strengthens the partnership by extending Airgas’ supply to all three of Johnson’s principal operating groups.

The agreement will be a part of the Airgas Strategic Accounts program, which caters to customers across multiple locations that benefit from sole-source supply and supply chain management services.

The Airgas Strategic Accounts program combines the company’s industry-leading distribution platform of products and services as well as professional expertise to deliver custom-tailored solutions for a broad range of industries.

Airgas Strategic Account managers and teams within twelve Airgas regional companies provide services on a daily basis through more than 850 branch locations.

Airgas delivered an adjusted EPS of 80 cents in its third quarter fiscal 2011, a growth of 23% from 65 cents in the year-ago quarter and a penny ahead of the Zacks Consensus Estimate. EPS in the quarter was also at the high end of Airgas’ third quarter earnings guidance range of 76 cents to 80 cents per share ascribed to solid revenue growth and effective cost management.

Management expects fourth quarter EPS in the range of 82 cents to 86 cents, reflecting a year-over-year growth of 19% to 25% from the year-ago EPS of 69 cents. For full year 2011, management projects EPS in the range of $3.28 to $3.32, up from the previous expectation of $3.22 to $3.32. The Zacks Consensus Estimates for the fourth quarter and fiscal 2011 currently stand at 85 cents and $3.31, respectively.

We believe Airgas’ strong market position, growth opportunities, well-known brand identity, size and scale advantage, extensive U.S. distribution network, and product/service offering, diverse customer base and a multifaceted growth formula will favor the company in the years ahead. We currently have a Zacks #2 Rank (short-term Buy recommendation) on the stock.

Pennsylvania-based Airgas and its subsidiaries collectively distribute industrial, medical, and specialty gases and chemicals. It competes directly with Air Products (APD).

 
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