Markets

Airgas Tumbles to 52-Week Low on Near-Term Challenges

Credit: Shutterstock photo

Airgas, Inc.ARG reached a new 52-week low of $91.52 yesterday, before closing a notch higher at $92.34. Year-to-date, Airgas' shares have delivered a negative return of around 19.8%.

The distributor of industrial, medical, and specialty gases, and hardgoods posted soft first-quarter fiscal 2016 earnings impacted by challenging economic conditions. Notably, Airgas guided second-quarter fiscal 2016 earnings per share in the range of $1.28 to $1.33, which includes negative impact of cost pressure related to helium supply extension and diversification initiatives as well as variable compensation reset following a below-budget year. The company also expects year-over-year organic sales growth rate in the low-single digits.

Among the challenges faced by the company is the helium supply constraint encountered by the global industrial gas industry. Unfortunately, the helium market has contracted, with numerous customers switching to alternatives, increasing conservation efforts, or deciding to no longer using the product. A large number of Airgas' industrial customers have gone on a significant conservation mode that may hurt its performance.

Further, the recent increment of helium production capacity in the Middle East coupled with the global economic slowdown has created a worldwide helium supply surplus which will challenge Airgas' ability to pass on all of the increased cost to its customers in the near term.

Weakness in energy and chemicals, manufacturing and metal fabrication will affect the distribution segment. Within energy and chemicals, larger rapid decline in the price of oil experienced in the March quarter and the current sustained low price of oil, continues to pressure Airgas' customers engaged in upstream activity.

Airgas' gross margins continue to be under pressure due to the mix shift to hardgoods, Argon supply chain disruptions as well as soft refrigerants pricing. Moreover, slowing global economy and a strong dollar continue to impact the company's growth.

Additionally, the Zacks Rank #3 (Hold) stock has witnessed downward estimate revisions over the last 90 days. The Zacks Consensus Estimate for 2016 and 2017 decreased roughly 0.4% to $4.95 per share and 1.8% to $5.45 per share, respectively.

Other Stocks that Warrant a Look

Some better-ranked stocks in the same sector include Air Products & Chemicals Inc. APD , Arkema S.A. ARKAY and Celanese Corporation CE . All these stocks hold a Zacks Rank #2 (Buy).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days . Click to get this free report >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

AIR PRODS & CHE (APD): Free Stock Analysis Report

AIRGAS INC (ARG): Free Stock Analysis Report

CELANESE CP-A (CE): Free Stock Analysis Report

ARKEMA-ADR (ARKAY): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

ARKAYAPDCE

Other Topics

Stocks

Latest Markets Videos

Zacks

Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

Learn More