) tumbled 5% after the company hinted toward a
lower-than-expected fourth quarter 2013 with earnings coming
below the guidance of $1.18 to $1.24 per share. Disappointing
organic sales growth in the Distribution segment so far in the
quarter, ending March 31, 2013, is touted to be main reason for
the guidance miss.
Earlier, during the third quarter conference call, Airgas had
guided fourth quarter adjusted earnings per share to increase 6%
to 12% annually to a range of $1.18 to $1.24. For fiscal 2013,
the company had expected adjusted earnings per share to increase
7% to 9% to the range of $4.40 to $4.46 from $4.11.
Airgas elaborated that even though organic sales growth in
January was in line with the low-single-digit growth factored in
the fourth quarter guidance, it dipped to negative 2% in
February. In total, quarter-to-date organic sales growth till
February was flat year over year and around 2% to 3% lower than
the guidance assumptions. The shortfalls were volume-related in
both gases and hardgoods, such as welding gear.
So far in March, sales growth has not shown any considerable
pickup from February. Given no major catalyst driving sales in
the last few days of March, it seems evident that Airgas will lag
the lower end of its adjusted EPS guidance of $1.18 by
Airgas, however, continued to realize SAP benefits as expected
during the quarter. It has substantially completed its $600
million share repurchase program. However, it will not have any
impact on the current quarter's results due the timing of the
purchases and the pre-funding of the financing to take advantage
of the attractive debt markets.
In the previous quarter, Airgas missed its guidance of $1.05 -
$1.11 a share, posting adjusted earnings of $1.01, up 7% from 97
cents earned in the year-ago quarter. Revenues in the reported
quarter rose 5% year over year to $1,207.7 million. Organic
growth in the quarter was 4%, with gas and rent growing 6%,
offset by a 1% decline in hardgoods. The Distribution business
segment had reported an organic growth of 2% in the quarter.
The company is focusing on implementing SAP across its
distribution channel and currently about 70% of the businesses
are running on SAP. Airgas remains confident that SAP
implementation will enable it to realize its full economic
benefits and help it to serve its customers better. The company
expects to achieve its projected $75 to $125 million in income
benefits by the end of 2013.
Pennsylvania-based Airgas, through its subsidiaries,
distributes industrial, medical and specialty gases as a well as
hardgoods in the U.S. Airgas currently retains a short-term Zacks
Rank #3 (Hold). Other stocks to consider in the same industry are
Air Products & Chemicals Inc.
Eastman Chemical Co.
), which hold Zacks Rank #2 (Buy) and are favorable options for
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