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Analyst Blog

Shares of Airgas, Inc. (ARG - Analyst Report) reached a new 52-week high of $104.40 on Tuesday, May 28, 2013. The new high was primarily driven by the company’s ability to consistently raise dividends, its strong free cash flow and improved outlook for 2014.

Airgas stock has delivered a decent one-year return of about 20.6% and year-to-date return of about 14.4%. Average volume of shares traded over the last three months was approximately 0.5 million.

This industrial and specialty gases supplier with a Zacks Rank #3 (Hold) stock has a market cap of $7.82 billion and a long-term expected earnings growth rate of 11.9%.

Airgas’ Strengths

Airgas’ strong brand identity, size and scale advantage, an extensive U.S. distribution network and a diverse customer base position the company for sustainable long-term growth. Furthermore, acquisitions, share buybacks and SAP implementation will provide a solid tailwind going forward.

Airgas recently hiked its quarterly dividend by 20%, from 40 cents per share to 48 cents per share. The current dividend yield is at 1.90%. Backed by its strong cash flow and financial stability, Airgas can increase its dividend while continuing to fund its growth strategies.

Tepid 4Q13 Earnings, Improved Outlook for Fiscal 2014

Airgas’ fourth-quarter 2013 earnings per share of $1.14 increased 3% from $1.11 earned in the year-ago quarter. Disappointing organic sales growth in the Distribution segment arising from weak volume in both gases and hardgoods affected results in the quarter. However, despite the soft economy, Airgas reported a record earnings per share of $4.35 in fiscal 2013, up 6% over the prior year.

For fiscal 2014, Airgas projects earnings in the range of $5.00 to $5.35, projecting a 15% to 23% annual growth. Even though results will bear the brunt of the weak business conditions in the first half of fiscal 2014, it will improve in the latter half. This will lead to low-to-mid single-digit organic sales growth for the full year, with gas and rent outpacing hardgoods.

The Zacks Consensus Estimate for fiscal 2014 currently stands at $5.14 per share, reflecting 18% year-over-year growth and is within the company’s guidance.

Other Stocks to Consider

Airgas’ industry peers Celanese Corp (CE - Analyst Report), Methanex Corp (MEOH - Analyst Report) and Shin-Etsu Chemical Co., Ltd. hold a Zacks Rank #1 (Strong Buy) and are worth considering.

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