Industrial gas producer and supplier, Praxair Inc. (PX) reported adjusted earnings per share of $1.55 for the fourth quarter of 2013, up 12.3% year over year and in line with the Zacks Consensus Estimate.
The adjusted earnings figure for the quarter excludes 4 cents per share of bond redemption charges and 8 cents of income tax benefits. Including these one-time items, GAAP earnings per share in the quarter were $1.59.
In 2013, adjusted earnings per share were $5.93, up from $5.57 earned in 2012 and in line with the Zacks Consensus Estimate.
Revenue: Praxair generated total sales of $3,010.0 million in the fourth quarter 2013, reflecting an increase of 7.5% year over year. The top line was however below the Zacks Consensus Estimate of $3,043 million.
The year-over-year revenue increase can be attributed to a 7% contribution from volume growth and 3% from acquisitions, partially offset by a 2% negative impact from foreign currency translation.
In the fourth quarter 2013, revenues generated from North America were up 11% year over year while that from Europe also increased 11%. Revenue from South America decreased 1.0% and Asia revenues went up 5.0%. Surface Technologies revenue was at $164 million in the quarter, up 1.2% from the year-ago quarter.
Margins: Cost of sales in the fourth quarter 2013 increased 7.3% year over year and represented 56.4% of the total revenue. Selling, general and administrative expenses were $332 million, up 4.1% year over year. Research and development expenses were $26 million versus $25 million in the year-ago quarter.
Adjusted operating profit at Praxair in the quarter was $690 million, up 11.5% year over year while adjusted margin stood at 22.9%.
Balance Sheet: Exiting the fourth quarter 2013, Praxair’s cash and cash equivalent balance was $138 million, up from $134 million in the previous quarter. Long-term debt increased 1.8% sequentially to $8,026 million.
Cash Flow: Praxair generated net cash of $964 million from operating activities in the fourth quarter 2013, up from $879 million in the year-ago quarter. Capital spending went down 11.9% to $516 million.
Share Repurchases/Dividends: Praxair pursues a consistent strategy of returning cash to shareholders through dividend payments and share repurchases. During the fourth quarter 2013, the company paid $177 million in dividends and repurchased shares worth $132 million while roughly $708 million was spent on dividend payments and $590 million on share repurchases in 2013.
Concurrent with the earnings release, Praxair’s board of directors approved a $1.5 billion share repurchase program. The new program is in addition to the company’s existing program of $1.5 billion approved in Jan 2012. This is expected to be completed by the end of 2014.
Also, Praxair’s board of directors gave a green signal to an 8% or 5 cent increase in the quarterly dividend rate. The rate now stands at 65 cents and will be paid on Mar 17, 2014, to shareholders of record as on Mar 7, 2014.
Outlook: For the first quarter of 2014, management of Praxair projects adjusted earnings per share in the $1.48–$1.53 per share range, up 7%–11% from $1.38 earned in the first quarter of 2013.
For 2014, adjusted earnings per share are expected in the band of $6.25–$6.55, reflecting an increase of 5%–10% year over year.
Sales are expected to be roughly $12.3–$12.8 billion for the full year, including a 3% negative currency translation impact. Capital spending is expected to be within $1.8–$2.0 billion and the adjusted effective tax rate is projected at 28%.
Praxair Inc. is the largest industrial gas producer and supplier in the Americas and one of the leading gas producing companies worldwide. The company currently has a market capitalization of $37.0 billion and a Zacks Rank #4 (Sell).
However, better-ranked stocks in the industry include L'Air Liquide SA (AIQUY), Northern Technologies International Corp. (NTIC) and Koppers Holdings Inc. (KOP). While both L'Air Liquide and Northern Technologies International hold a Zacks Rank #1 (Strong Buy), Koppers Holdings carries a Zacks Rank #2 (Buy).