In a bid to complement and expand its business, Airgas, Inc. (ARG) has announced the acquisition of the assets and operations of six businesses engaged in industrial gas and equipment supplies. The newly acquired businesses have its operations spread across the U.S. and generated combined revenues of roughly $17 million in 2011.
The recent acquisitions include the assets and operations of Terjan Co., Inc. operating as Valley Welding & Industrial Supply, AEON Corporation operating as Ferguson Industrial Gases, Mountain Welding Supply, LLC, Carbonic Group, Reese Oxygen & Hydro-Testing, LLC and Chicoutimi, Quebec location of Soudogaz, Inc.
The acquisitions are expected to augment the packaged gas and hardgoods distributor portfolio of Airgas. In addition, the acquisitions will help Airgas to extend its geographical reach and provide it with an opportunity to cater to a wider customer base.
Since its inception, acquisitions have been a major growth driver for Airgas. It has made over 400 acquisitions in its history. During fiscal 2012, Airgas acquired eight business operations with aggregate historical annual sales of nearly $106 million.
Airgas’ results, in the first quarter of fiscal 2013, were hurt by lower helium sales volume. The company delivered adjusted earnings of $1.13 per share, missing the Zacks Consensus Estimate of $1.15. Total revenues increased 8% year over year to $1,257.3 million, but lagged the Zacks Consensus Estimate of $1,272.
The company expects adjusted earnings to remain in the range of $1.05-$1.09 per share for the second quarter of fiscal 2013. The Zacks Consensus Estimate for the quarter is $1.08. For fiscal 2013, the company expects earnings to lie within $4.65-$4.75 per share, while the Zacks Consensus Estimate is pegged at $4.68.
We expect that lower helium supply chain resulting in lower helium sales volumes will affect Airgas’ performance moving ahead. Moreover, integration related risks including failing to achieve the targeted synergies may also negatively affect its results.
Airgas retains a short-term Zacks #4 Rank (Sell). We have a long-term a Neutral recommendation on the stock.
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