Airgas, Inc. (ARG), the supplier of industrial, medical and specialty gases, and hardgoods declared that its operating units will raise the prices of various products and gases to combat rising costs on multiple fronts including product costs, supplier costs, labor and benefits, and regulatory compliance. The increase is effective Jul 1, 2014, or as allowed by contracts.
A price hike of 5–15% will be implemented on bulk and packaged industrial, medical, and specialty gases and upto 25% on argon. Welding hardgoods and safety products prices will be raised 3–5%, along with adjustment of delivery and other service fees.
In addition, rental rates on cylinder and bulk tank of Airgas will be increased by 5–15% effective Jun 1, 2014, or as contracts permit. Some price adjustments may be outside these ranges based on specific market conditions.
Supply and demand imbalances for some products, especially argon, are driving up production and distribution expense. Supplier allocations and constantly changing supply and demand geographies are resulting in greater distribution expenses to carry the gas from its place of production to customers.
Airgas will mitigate rising costs by investing in infrastructure and technologies. This will help the company to serve its customers efficiently, ensuring reliability on the supply chain and safety practices. The price rise has also been driven by escalating natural gas and power costs.
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 of $1.18–$1.23 per share.
For fiscal 2015, Airgas expects earnings per share in the range of $5.00 to $5.20. The guidance includes 11–16 cents per share negative year-over-year impact from variable compensation.
Among the challenges faced by Airgas is the helium supply constraint encountered by the global industrial gas industry. During fiscal 2014, Airgas’ helium suppliers continued to fall short of their volume commitments and the company expects some level of supply chain disruption during fiscal 2015 as well.
Although the 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.
Radnor, PA-based Airgas, through its subsidiaries, distributes gases as a well as hardgoods to diverse businesses in the U.S. The company also markets its products and services through e-business, catalog and telesales channels.
Airgas currently has a Zacks Rank #4 (Sell).
Some better-ranked stocks in the same industry are Compass Minerals International Inc. (CMP), L'Air Liquide SA (AIQUY) and PetroLogistics LP (PDH). While Compass Minerals sports a Zacks Rank #1 (Strong Buy), L'Air Liquide and PetroLogistics carry a Zacks Rank #2 (Buy).
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