Airgas Inc. Earnings: Double-Digit Growth Continues

S&P 500 (NYSE:SPY) component Airgas Inc. (NYSE:ARG) reported its results for the third quarter. Airgas, through its subsidiaries, distributes industrial, medical, and specialty gases and hardgoods in the United States. It offers a range of gases, including nitrogen and helium, as well as welding and fuel gases.

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Airgas Earnings Cheat Sheet for the Third Quarter

Results: Net income for the industrial equipment wholesale company rose to $72.3 million (93 cents per share) vs. $55.8 million (65 cents per share) in the same quarter a year earlier. This marks a rise of 29.5% from the year earlier quarter.

Revenue: Rose 11.5% to $1.15 billion from the year earlier quarter.

Actual vs. Wall St. Expectations: ARG reported adjusted net income of 97 cents per share. By that measure, the company fell in line with the mean estimate of 97 cents per share. Analysts were expecting revenue of $1.14 billion.

Quoting Management: “We continue to see evidence of steady economic growth in U.S. manufacturing, as well as in our petrochemical and energy customers,” said Airgas Chief Executive Officer Peter McCausland. “Strong growth in welding and automation equipment revenue is outpacing the remainder of our hardgoods portfolio, which is an encouraging indicator of future activity in our industrial customer base.”
“Adjusted operating margin of 11.7% for the third quarter included 110 basis points of impact from SAP implementation costs and depreciation expense. Prior year adjusted operating margin of 12.2% included only 30 basis points of impact from SAP implementation costs and depreciation expense. Distribution segment operating margin, which does not include an allocation of SAP implementation costs, was 12.7% for the third quarter, a 30 basis point improvement over the prior year. “Our sharp operating focus drove sequential expansion in our Distribution segment gross and operating margins,” McCausland said. “Our return on capital increased by 100 basis points over last year to 12.3% as we continue to leverage our national footprint and industry-leading platform on growing sales volumes.”

Key Stats:
The company has now seen net income rise in three straight quarters. In the second quarter, net income rose 16.7% and in the first quarter, the figure rose 15.5%.

Gross margin shrank 0.8 percentage point to 54.9%. The contraction appeared to be driven by increased costs, which rose 13.7% from the year earlier quarter while revenue rose 11.5%.

Revenue has risen the past four quarters. Revenue increased 11.8% to $1.19 billion in the second quarter. The figure rose 10.6% in the first quarter from the year earlier and climbed 12.5% in the fourth quarter of the last fiscal year from the year-ago quarter.

The company fell in line with estimates last quarter after topping expectations in the previous two quarters. In the second quarter, it topped the mark by one cent, and in the first quarter, it was ahead by 3 cents.
Looking Forward: Expectations for the company’s next quarter performance are higher than they were ninety days ago. Over the past three months, the average estimate for the fourth quarter has risen to $1.06 per share from $1.02. The average estimate for the fiscal year is $4.04 per share, a rise from $3.98 ninety days ago.

Competitors to Watch: Air Products & Chemicals, Inc. (NYSE:APD), Praxair, Inc. (NYSE:PX), and Rentech, Inc. (AMEX:RTK).

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(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

To contact the reporter on this story: Derek Hoffman at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com