As expected, Airgas is performing better, and institutional investors (IIs) have looked past near-term sluggish revenue to projected, brighter quarters in FY2010
To be sure, Airgas is no longer viewed by IIs as a recession-proof play, but the company's value-added remains compelling -- one that boasts a strategic advantage: Airgas is the U.S.'s largest distributor of packaged gases and welding, safety and related products, with an average market share of about 25%. The First Call FY2009/FY2010 EPS estimates for ARG are $2.77 to $3.20.
Further, while some view a P/E of 15 as fair for Airgas, the view from here argues it's low, given Airgas' market share and its sales upside potential, assuming the U.S. economic recovery continues to progress.
Technically, Airgas' stock has pulled-back after breaking through psychological resistance at $50. Generally, that would warrant a pause in accumulating shares, but ARG's uptrend rules the day here; hence, view the pull-back as a buy opportunity.
Stock Analysis: Airgas Inc. is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 50% position in ARG now; then buy another 25% in one month, if U.S. economic conditions don't worsen substantially. Under any circumstance, don't buy more than 75% of your ARG position before February 2010. Sell/stop loss if you were to buy shares in this company: $24.
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Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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