Airgas Downgraded to Strong Sell - Analyst Blog

On May 17, 2014, Zacks Investment Research downgraded Airgas, Inc. ARG, the supplier of industrial, medical and specialty gases and hardgoods, to a Zacks Rank #5 (Strong Sell).

Why the Downgrade?

On May 1, Airgas reported its fourth-quarter and full-year fiscal 2014 (ended Mar 31, 2014) financial results. Even though adjusted earnings improved 1% year over year to $1.15 per share in the quarter, it fell short of the Zacks Consensus Estimate of $1.19 per share as well as management's earnings guidance $1.18–$1.23 per share.

Airgas' adjusted earnings per share were $4.72 in fiscal 2014, up 9% from $4.35 in the prior year, but fell short of the Zacks Consensus Estimate of $4.76.

For fiscal 2015, Airgas expects earnings per share in the range of $5.00 to $5.20, representing a 6% to 10% year-over-year rise. However, the guidance includes 11–16 cents per share negative year-over-year impact from variable compensation.

While 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 defense. In addition, uncertainty in the U.S. industrial economy which is likely to continue for the next two years will hurt the company's performance.

Following the fourth-quarter earnings announcement, the Zacks Consensus Estimate for 2015 has gone down 6% to $5.11 per share. Likewise, the Zacks Consensus Estimate for 2016 fell 6.8% to $5.79 per share.

Other Stocks to Consider

Some other stocks in the same sector that warrant a look include Compass Minerals International Inc. CMP, L'Air Liquide SA (AIQUY) and The Dow Chemical Company DOW. While Compass Minerals holds a Zacks Rank #1 (Strong Buy), L'Air Liquide and Dow carry 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
 
AIR LIQUIDE-ADR (AIQUY): Get Free Report
 
AIRGAS INC ARG: Free Stock Analysis Report
 
COMPASS MINERLS CMP: Free Stock Analysis Report
 
DOW CHEMICAL DOW: Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research