) posted adjusted earnings of $1.15 a share in fourth-quarter
fiscal 2014 (ended Mar 31, 2014), up 1% from $1.14 reported in
the year-ago quarter. Results fell short of the Zacks Consensus
Estimate of $1.19 as well as the management's earnings guidance
of $1.18-$1.23 per share.
The net impact of severe weather in the United States was 2 cents
more than expected, while the negative year-over-year impact on
earnings related to Airgas' refrigerants business was 3 cents
greater than what was factored in the guidance. However, despite
sluggish business conditions and continued economic uncertainty,
the year-over-year rise in earnings was driven by the realization
of SAP-related benefits and share repurchases completed in the
second half of fiscal 2013.
Including state income tax benefits of 2 cents in the reported
quarter and restructuring charges in the prior-year quarter of 1
cent, earnings were $1.17 per share in the reported quarter, up
4% from $1.13 per share a year ago.
Revenues in the reported quarter edged up 0.4% year over year to
$1.27 billion from $1.26 billion a year ago. However, it
marginally missed the Zacks Consensus Estimate of $1.29 billion.
Acquisitions aided sales gain by 1%, while organic sales were
down 1% with a 1% decrease in gas and rent, and hardgoods down
2%. Distribution segment's organic sales in the quarter increased
1% year over year, with gas and rent up 2% and hardgoods down 2%.
Cost and Margins
Costs of goods sold decreased 1% year over year to $571 million.
Gross profit rose 1% to $696 million from $688 million in the
year-ago quarter. Consequently, gross margin expanded 40 basis
points (bps) to 54.9%.
Selling, distribution and administrative expenses amounted to
$468 million, up 2% year over year. Benefit from reduction in SAP
implementation costs was more than offset by rising healthcare
costs and higher operating expenses due to inclement weather, as
well as by expenses associated with Airgas' expansion of its
telesales business through Airgas Total Access, a strategic
pricing initiative, and enhancement of its e-Business platform.
Adjusted operating income dipped 2% to $150 million from $154
million in the year-ago quarter. Adjusted operating margin
contracted 40 basis points to 11.8% in the quarter. Reduction in
SAP implementation costs and the achievement of SAP-related
benefits helped margins but were offset by the impact of low
organic sales growth and the R-22 pricing in its refrigerants
business following the EPA's unexpected ruling in late Mar 2013.
Fiscal 2014 Performance
Airgas reported adjusted earnings per share of $4.72 in fiscal
2014, up 9% from $4.35 in the prior year. Earnings were within
the company's guided range of $4.69 to $4.74, but fell short of
the Zacks Consensus Estimate of $4.76. The favorable
year-over-year impact of share repurchases completed in the
second half of fiscal 2013 was partially offset by the negative
year-over-year impact related to its refrigerants business, which
posted record results in fiscal 2013. Including one-time items,
earnings stood at $4.68 in fiscal 2014 compared with $4.35 in the
Revenues rose 2% to $5.07 billion from $4.96 billion in fiscal
2013. Revenues fell short of the Zacks Consensus Estimate of
$5.097 billion. Organic sales were flat year over year, with gas
and rent up 1% and hardgoods down 2%, while acquisitions
contributed 2% of sales growth of.
Cash, as of fiscal 2014 end was at $69 million, down from $86
million as of fiscal 2013 end. Adjusted cash flow from operations
for the reported fiscal was a record $776 million, a
year-over-year increase of 29%. Free cash flow in fiscal 2014
also marked a record of $441 million, up 48% year over year.
Long-term debt decreased to $1.70 billion as of Mar 31, 2014,
from $2.3 billion as of March 31, 2013.
Airgas' board of directors increased the quarterly cash dividend
by 15% to 55 cents per share from 48 cents per share. The
increased dividend will be paid on Jun 30, 2014 to shareholders
of record as of Jun 13, 2014.
The company expects earnings per share in the range of $1.15 to
$1.20 for the first quarter of fiscal 2015, which reflects an
increase of 1% to 5% over prior-year earnings per share of $1.14.
The company expects organic sales growth in low single digits for
For fiscal 2015, the company expects earnings per share in the
range of $5.00 to $5.20, representing a 6% to 10% year-over-year
rise. The guidance includes an 11-16 cents per share negative
year-over-year impact from variable compensation reset following
a below-budget year. Airgas currently expects its refrigerants
business to make a slightly favorable contribution to its
year-over-year earnings per share growth in fiscal 2015.
Radnor, PA-based Airgas, through its subsidiaries, distributes
industrial, medical and specialty gases as a well as hardgoods in
the U.S. The company also markets its products and services
through e-business, catalog and telesales channels.
Airgas currently carries a Zacks Rank #3 (Hold). Other
chemical-diversified stocks worth a look include
Compass Minerals International Inc.
) sporting a Zacks Rank #1 (Strong Buy), and
L'Air Liquide SA
) holding a Zacks Rank #2 (Buy).
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