AIQUY L Air Liquide (PK)

Airgas Inc. (ARG) reported fiscal 2012 first quarter results, delivering an EPS of 93 cents compared with 76 cents in the year-earlier quarter. The quarter noted some special items including restructuring charges of 10 cents, 5 cents pertaining to benefit related to unsolicited takeover attempt and a 1 cent charge related to multi-employer pension withdrawal charges.

Excluding these items, adjusted EPS rose sharply to 99 cents from 83 cents in the year-ago quarter, beating the Zacks Consensus Estimate of 96 cents.

Total revenue in the reported quarter rose 11% year over year to $1.16 billion, just above the Zacks Consensus Estimate of $1.15 billion. Sales from same stores were up 9%, with hardgoods gaining 13% and gases and rent growing at 7%. Acquisitions contributed 2% to the sales growth.

Cost and Margins

Costs of goods sold increased to $530.8 million in the quarter from $475.1 million in the year-earlier quarter. Selling, distribution and administrative expenses amounted to $423.4 million, up from $390.5 million in the year-earlier quarter.

Operating income rose to $137.0 million in the quarter from $122.7 million in the year-ago quarter. However, operating margins declined drastically by 1,400 basis points year over year to 11.8%.

Financial Position

Cash, as of June 30, 2011 amounted to $60.5 million, up from $57.2 million as of March 31, 2011.

As of June 30, 2011, the debt-to-capitalization ratio declined to 59.5% from 51.5% as of March 31, 2011 and 45.0% as of December 31, 2010.

Cash from operations was an inflow of $110.3 million at the end of the first quarter 2012 versus an outflow of $130.2 million at the end of the prior-year period.

During the quarter, Airgas acquired four businesses with approximately $70 million in aggregate annual revenues, including industrial gas and welding distributor ABCO in New England, as well as carbon dioxide and dry ice producer and distributor Pain Enterprises in the Midwestern U.S.

Outlook

Management provided elaborate guidance for second quarter and full year 2012. For the second quarter adjusted EPS is expected in the range of $0.99 to $1.03, growing at a brisk rate of 19% to 24%.

For full year 2012, adjusted EPS is expected in a band of $3.90 to $4.05, growing at a 17% to 21% clip. Guidance for both periods is inclusive of the benefits from the recently concluded share buyback programs.

Our Take

The company recently realigned its operations, aimed at facilitating communication and control over each business unit. The ABCO acquisition, completed lately, also complements Airgas’ businesses with its benefits extended to the customers and employees of both Airgas and ABCO. The acquisition of Pain Enterprises brings Airgas increased opportunities for expanding its Penguin Dry Ice brand into new geographies and more retail locations.

Moreover, the company is expected to continue reaping benefits from the SAP implementation. Currently, the company retains a Zacks #2 Rank, which translates into a short-term (1 to 3 months) Buy rating.

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 L'Air Liquide SA (AIQUY). 

 
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