While second-quarter earnings fell right in the middle of Airgas' guidance range, sales softened in the second half of September, a concern for the company because that's "normally a time when activity picks up meaningfully," according to Executive Chairman Peter McCausland during the company's second-quarter earnings call.
While it's difficult to pinpoint the cause of this softening, the looming government shutdown may have played a role, McCausland says. "It can only have had a negative impact on business confidence and spending, particularly for our smaller customers," he says. "Growth is hard to come by in this economy."
Organic sales increased 2 percent in the quarter, with gas and rent up 4 percent and hardgoods down 2 percent. (More details on Airgas' second-quarter earnings available here.)
Airgas' government sales make up a relatively small percentage of its total sales, so the impact has been more indirect, McCausland says. "But what we see is just a general uncertainty out there," he says. "And it's pretty much across the board."
Add that to the still-slow recovery, and businesses just aren't spending right now.
As a result, Airgas is taking a "more cautious view" for the rest of fiscal year 2014, lowering organic growth assumptions.
"Please don't think that our outlook, our cautious outlook, dims my excitement about the future," McCausland says. Just because there's a need for caution right now doesn't mean there aren't signs of revival. Nonresidential construction, in particular, is showing signs of moving in the right direction, as "rumored larger projects have moved into the permitting phase," he says.
Airgas also remains optimistic about U.S. manufacturing and energy industries, which are benefiting from increased shipping costs from overseas and intellectual property protections in the U.S.
