Will Airgas (ARG) Miss Earnings Estimates this Quarter?

Airgas, Inc. (ARG), the supplier of industrial, medical and specialty gases and hardgoods, is slated to report first-quarter fiscal 2015 results before the market opens on Jul 24. In the last quarter it posted a negative surprise of 4.17%. Let’s see how things are shaping up for this announcement.

Factors Influencing this Quarter

Following the fourth quarter earnings announcement, the Zacks Consensus Estimate for 2015 had undergone sharp downward revisions. Airgas had reported adjusted earnings of $1.15 per share. Earnings edged up 1% year over year, but 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

Airgas expects earnings per share in the range of $1.15 to $1.20 for the first quarter of fiscal 2015, which reflects an increase of 1% to 5% compared with prior-year earnings of $1.14 per share. The company expects organic sales growth in low single digits for the quarter.

Among the challenges faced by the company is the helium supply constraint encountered by the global industrial gas industry. During fiscal 2013, 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. Moreover weak public construction spending remains the most alarming risk to non-residential recovery, particularly in the light of further government spending cuts. This pose as a headwind for Airgas making expected recovery in the non-residential market seemingly uncertain.

Earnings Whispers?

Our proven model does not conclusively show that Airgas is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here, as you will see below.

Zacks ESP: Airgas has an Earnings ESP (Expected Surprise Prediction) of 0.00%. This is because the Most Accurate estimate stands at $1.18 per share, in line with the Zacks Consensus Estimate resulting in 0.00% ESP.

Zacks Rank #4 (Sell): Airgas has a Zacks Rank #4 which when combined with a 0.00% ESP makes surprise prediction difficult. We caution against stocks with Zacks Rank #4 and #5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks that Warrant a Look

Here are some other companies you may want to consider as our model shows that these have the right combination of elements to post an earnings surprise:

Albemarle Corporation (ALB) has an earnings ESP of +0.92% and a Zacks Rank #3 (Hold).

Celanese Corporation (CE) with an Earnings ESP of +0.71% holds a Zacks Rank #3.

LyondellBasell Industries NV (LYB) has an Earnings ESP of +3.13% and a Zacks Rank #2 (Buy).