Airgas (ARG, Financial) entered new fiscal 2015 on a good note. The company saw good improvement in both the top line and the bottom line. Airgas is seeing good traction for its products, which can be seen by a good improvement in sales. Management is pleased with the results, and believes that the company will perform better in the latter half of the fiscal year. The rising stock price is also an advantage for the firm, which can further help it gain market share in the future. With the future looking bright, and its focus on other profitable segment, Airgas looks geared up for better results ahead. Let us have a look at the overall underlying business of the company.
Quarterly performance
In the recently reported quarter, Airgas’ revenue climbed 2.6% to $1.31 billion as compared to $1.28 billion which it posted in the same quarter last year. However, these results on the revenue met Street’s estimates. Its profit also increased to $88.9 million from $84.7 million which it posted in the same quarter last year. Airgas was also impressive on the earnings part. Its earnings rose by 4.9% which also met consensus estimates.
Airgas looks well prepared for yet another good quarter. The company is in good financial shape and is having a sharp focus on the long term growth prospects. Though the business conditions were sluggish towards the end of the last fiscal year yet Airgas managed to enter the new fiscal year with flying colours. The company is seeing good room for its business in future as it is seeing good traction for its products and growing sales by 12% is a confirmation to it. Airgas is now focusing on various initiatives to improve its profitability. It is seeing strong long term prospects with U.S manufacturing and Energy segments.
Being in line its growth plan Airgas has couple of short term and long term strategic plans. In the short term, Airgas will be focusing majorly on some of the key points which it think it can control such as leveraging the SAP system, expense management, expansion of the telesales business, enhancing e-Business platform and adjusting its regional management structure to facilitate decision making in the favour of the customer and improve its focus on enhancing the sales. The company is further expecting the industrial economy to turn better which will again help the company to enhance its market position. This will also help it gain further market share.
Moving forward
In addition, Airgas is also seeing good response from other sectors such as transportation and retail. Airgas is expecting the non-residential construction activity to increase in the coming quarters which will surely uplift the construction and other key markets which will enhance the strong growth which the company is enjoying with its rental welder business. The company is expecting increase in the requests for staging of materials for energy related construction projects.
On the other hand, Airgas had been struggling with the headwinds that it was seeing with mining and heavy manufacturing segment. It is thinking that these segments are turning around and will be back on track in the near term. With everything going smooth, Airgas is now expecting stronger sales growth in the latter half of the fiscal year.
Moving ahead, Airgas has also acquired 5 businesses with which it is expecting meaningful contribution to the top line with good sales. Further, Airgas has also added Technical Alloy to its Gulf Coast region which will further increase its density and competitive position in the market. In addition to this, Airgas is also seeing good improvement in its Helium segment. It is pleased with the present position which may help it to win back the lost customers during helium shortage in the past. Airgas is expecting the Helium position to improve gradually in the coming years and it is also counting on the new auction process to open up access to the Federal Helium reserves which will again strengthen its position.
Conclusion
Now moving on to the fundamentals of the company, Airgas looks reasonable with trailing P/E of 23.44 and with the forward P/E of 19.51 Airgas is showing good earnings growth. In the next five year the earnings are growing at a CAGR of 11.20% which is less than the industry average of 17.22%. The company is continually focusing on the growth prospects and its focus on the other segments seems strong and the company is expected to gain impressive market share in future. So considering all such facts and statistics, Airgas is a good investment option as of now. So the investors should definitely include Airgas in their portfolio.
