On May 31, 2014, Zacks Investment Research downgraded
), the supplier of industrial, medical and specialty gases and
hardgoods, to a Zacks Rank #5 (Strong Sell).
Why the Downgrade?
On May 1, Airgas posted adjusted earnings of $1.15 a share for
fourth-quarter fiscal 2014 (ended Mar 31, 2014), up 1% year over
year, short of the Zacks Consensus Estimate of $1.19 per share as
well as management's earnings guidance of $1.18-$1.23 per share.
For fiscal 2015, Airgas expects earnings per share in the range of
$5.00 to $5.20, which reflects a 6% to 10% year-over-year rise. The
guidance includes 11-16 cents per share negative year-over-year
impact from variable compensation reset following a below-budget
One of the challenges faced by the company is the helium supply
constraint encountered by the global industrial gas market. Airgas'
helium suppliers continued to fall short of their volume
commitments and the company expects some level of supply chain
disruption during fiscal 2015 as well.
The American Institute of Architects' (AIA) Architecture Billings
Index (ABI) rose to 49.6 in Apr 2014, from 48.8 in March. The ABI
score was marked below 50, and any reading below 50 signifies a
decline in billings.
Although the recently started nonresidential construction projects
will be beneficial for Airgas in the near term, its railcar
production is still being weighed down by weakness in mining and
Following the fourth quarter earnings announcement, the Zacks
Consensus Estimate for 2015 has gone down 5.9% to $5.11 per share.
Likewise, the Zacks Consensus Estimate for 2016 fell 6.8% to $5.79
Other Stocks to Consider
Some other stocks in the same sector that warrant a look includes
Compass Minerals International Inc.
L'Air Liquide SA
Koninklijke DSM N.V.
). While Compass Minerals holds a Zacks Rank #1 (Strong Buy), L'Air
Liquide and Koninklijke carry a Zacks Rank #2 (Buy).
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