Airgas (ARG, Financial) reported strong numbers for the second quarter that came above the analysts expectations. The company continues to benefit from a recovering economy and weakness in the heavy manufacturing and mining industry is coming to an end. Led by its strong performance the stock touched its 52-week high few days back and seems to have better prospects ahead.
Gaining good traction
During the quarter, bulk and specialty gas categories showed great traction and the management is taking various initiatives to maintain the same momentum in the days ahead. It is focusing on three major areas to strengthen its growth namely managing expenses, expanding its telesales business and enhancing eBusiness. It will also adjust its regional management structure so that it will be able to focus more on sales growth and drive decision-making closer to its customers.
Its eBusiness platform was launched a few months back allowing customers to interact and transact with their guests through a robust suite of functionality and services.
In addition Airgas is about to complete the implementation of its new district manager structure. This new initiative is implemented with key two key objectives in mind, which includes; increasing sales and improved fulfillment and transactional excellence in all aspects of its order-to-cash process. Once the project is complete it will help the locally managed teams to take better decisions that will full fill its objectives.
During the quarter Airgas had lost some of its customers on account of helium shortage. But now the company is well prepared and is working hard to win back its lost customers. However, it has become all the more difficult because of the contraction of the helium market and shifting of customers to alternative products. The company also had to face some challenges with its argon supply, and the management anticipates the supply to remain tight at least in the near term.
In spite of these headwinds Airgas is confident of its long-term prospects on the back of a recovering U.S. manufacturing and energy industries. Along with this the acquisitions it made during the year will play a significant role to drive its top line.
Conclusion
According to a Zacks report, “in fiscal 2014, the company acquired eleven businesses with aggregate historical annual sales of around $82 million.” And these acquisitions “are expected to contribute 1 cent in earnings per share for fiscal 2015. By acquiring both core and adjacent product and service businesses, Airgas looks forward to continually enhance its integrated product and service offering.” Although the stock has not seen much volatility in the past one year but considering these factors we could see some significant changes in the coming months.
