APD Air Products and Chemicals Inc

Airgas Inc. (ARG) reported fiscal second-quarter 2012 results, delivering an EPS of $1.01 compared with 78 cents in the year-earlier quarter. The quarter noted some asset impairment charge of 2 cents.

Excluding this, adjusted EPS rose to $1.03 from 83 cents in the year-ago quarter, beating the Zacks Consensus Estimate of $1.02.

Total revenue in the reported quarter rose 12% year over year to $1.19 billion, above the Zacks Consensus Estimate of $1.16 billion. Sales from same stores were up 10%, with hardgoods gaining 14% and gases and rent growing at 7%. Acquisitions contributed 2% to sales growth.

Cost and Margins

Costs of goods sold increased to $552.6 million in the quarter from $476.2 million in the year-earlier quarter. Selling, distribution and administrative expenses amounted to $423.4 million, up from $396.6 million in the year-earlier quarter.

Operating income rose to $142.0 million in the quarter from $121.8 million in the year-ago quarter. Adjusted operating margin for the second quarter improved by 20 basis points to 12.2% from the prior year and included 70 basis points of impact of SAP implementation costs and depreciation expense.

Financial Position

Cash, as of September 30, 2011 amounted to $36.7 million, up from $57.2 million as of March 31, 2011.

Adjusted cash from operations was $257 million in the reported quarter versus $299 million in the prior-year quarter. The decrease in free cash flow from the prior year reflects an increase in capital expenditures and working capital to support sales growth.

Airgas’ return on capital increased by 140 basis points year over year to 12.3% based on higher sales volumes.

Outlook

Management provided elaborate guidance for second quarter and full-year 2012. For the third quarter, adjusted EPS is expected to be in the range of 95 cents per share to 98 cents per share, growing at a brisk rate of 19% to 23%.

For full-year 2012, adjusted EPS is expected in a band of $3.97 to $4.07, growing at a 19% to 22% clip.

The guidance for both the periods includes the benefit of the two recently completed share repurchase programs, which offsets incremental year-over-year SAP costs. The guidance however excludes the impact of restructuring charges and related costs

Our Take

Based in Randor, Pennsylvania, Airgas, through its subsidiaries, distributes industrial, medical, and specialty gases, as well as hard goods in the United States. Airgas competes with Air Products & Chemicals Inc. (APD) and American Air Liquide, Inc.

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

 
AIR PRODS & CHE (APD): Free Stock Analysis Report
 
AIRGAS INC (ARG): Free Stock Analysis Report
 
Zacks Investment Research