UPDATE 4-Airgas bullish on US manufacturing; boosts forecast

Thu Jul 28, 2011 2:59pm EDT

* Fiscal Q1 adj EPS 99 cents vs. Street forecast 96 cents

* Revenue $1.16 billion vs. $1.15 billion expectation

* Q2 guidance ahead of estimates; full-year outlook raised

* CEO calls on Congress to reform U.S. tax code

* Shares up 0.9 percent in afternoon trading (Adds analyst; updates stock)

By Roy Strom and Ernest Scheyder

NEW YORK, July 28 (Reuters) - Industrial gas supplier Airgas Inc (ARG.N) posted a higher-than-expected quarterly profit and raised its 2011 forecast on Thursday, saying it is seeing improvement in U.S. manufacturing.

Airgas supplies canisters of oxygen, argon and other gases used in construction, healthcare and dozens of other industries.

Many of Airgas' customers are expanding in the United States, where nearly all of the company's operations are located, Airgas Chief Executive and founder Peter McCausland told Reuters.

"Our manufacturing customers are hiring, they're building new plants, they're expanding existing plants," he said. "I wouldn't call it gangbusters, but we haven't seen this in years and years."

That is helping results, BB&T Capital Markets analyst Holden Lewis said.

"North American industrial activity remains reasonably healthy," Lewis said. Airgas is "without a doubt continuing to see the benefits and advantages of that sort of environment."

McCausland said U.S. lawmakers debating the country's debt limit and deficit should address Medicare, Social Security and tax reform.

"What's going on in Washington concerns me more than anything going on in our business," McCausland said. "We need courageous people in Washington and my biggest fear is they're not there."

The U.S. should start taxing offshore profit from American companies, he said.

With most of its operations in the United States, Airgas pays the full 39 percent corporate tax rate.

McCausland also said he favors a plan from U.S. House of Representatives Speaker John Boehner, which would extend the U.S. Treasury's borrowing authority by a few months, something President Barack Obama has said he does not agree with. [ID:nN1E76R004]

Extending the deadline temporarily "means that we'll have to deal with it in a year, but that's not a bad thing," McCausland said. "I think it's a good idea that it's on the table as we move toward the elections next year."

BETTER-THAN-EXPECTED RESULTS

Airgas reported earnings per share of 99 cents, excluding items. Analysts on average had expected 96 cents, according to Thomson Reuters I/B/E/S.

Revenue came in at $1.16 billion, slightly topping analysts' expectations of $1.15 billion.

Net income was $74.85 million, compared with $64.80 million a year ago.

The low end of the company's second-quarter guidance came in above the 98 cents analysts expect.

Airgas said second-quarter unadjusted earnings per share will be between 99 cents and $1.03, a 19 percent to 24 percent rise from last year.

Airgas raised its full-year profit forecast to $3.90 to $4.05 a share, excluding items, from $3.75 to $3.90. It cited favorable business trends.

The company successfully fended off a hostile $5.9 billion takeover bid from rival Air Products and Chemicals Inc (APD.N) earlier this year, in part by insisting its shareholders would see a greater return if the deal did not go through. [ID:nN15128419]

The shares of Pennsylvania-based Airgas were up 0.9 percent at $69.13 in afternoon trading. The stock has traded between $60.33 and $71.25 in the past 52 weeks. (Reporting by Roy Strom and Ernest Scheyder; editing by Lisa Von Ahn, Dave Zimmerman, Andre Grenon and Gunna Dickson)

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