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Praxair Q3 Earnings Beat as Revenues Lag, Outlook Slashed

Zacks Equity Research

Industrial gas producer and supplier Praxair Inc. PX reported better-than-expected bottom-line results for third-quarter 2015. The company’s adjusted earnings came in at $1.46 per share, surpassing the Zacks Consensus Estimate of $1.44 per share. However, earnings per share decreased 9.9% year over year.

The year-over-year decline was primarily triggered by uncertain global economic conditions and unfavorable foreign currency movements.

Adjusted bottom line excluded an expense of 4 cents per share related to cost-reduction measures that were initiated to counter weak demand led by softness in emerging and energy-related end markets. Also, adjusted results excluded 2 cents per share of pension-settlement charge.

Praxair Inc. - Earnings Surprise | FindTheBest

 

Revenue

Praxair generated net sales of $2,686 million in third-quarter 2015, down 14.6% year over year. Also, the figure lagged the Zacks Consensus Estimate of $2,756 million. The year-over-year fall in revenues was triggered by a 1% decline in organic revenues as well as negative impact of 11% from foreign currency translation, 2% from lower cost pass-through and 1% from equipment sale.

On a segmental basis, revenues generated in North America decreased 10.7% year over year to $1,463 million; while that from Europe fell 12.2% to $338 million. In Asia, revenues decreased 7.3% to $395 million. Surface Technologies revenues were $147 million, down from $171 million in the year-ago quarter. Revenues from South America declined 34.4% to $343 million.

Margins

Praxair’s cost of sales in the quarter decreased 16.4% year over year, representing 55.4% of net sales versus 56.6% recorded in the year-ago quarter. Selling, general and administrative expenses were down 14.1% year over year to $281 million. Research and development expenses were $23 million, slightly below the year-ago tally of $25 million.

Adjusted operating profit came in at $620 million, down 12.8% year over year; while adjusted margin was 23.1%.

Balance Sheet

Exiting third-quarter 2015, Praxair had cash and cash equivalents of approximately $136 million, flat with the previous quarter. Long-term debt increased 2.8% sequentially to $9,057 million.

Cash Flow

Praxair’s net cash generated from operating activities totaled $676 million, down from $713 million in the year-ago quarter. Capital spent on purchase of property, plant and equipment was $405 million, down from the year-ago tally of $430 million.

During the quarter, Praxair repurchased stocks worth $235 million and paid dividends amounting to $203 million.
 
Concurrent with the earnings release, Praxair announced that its board of directors has approved the payment of a quarterly dividend of 71.5 cents per share on Dec 15, 2015 to its shareholders of record as on Dec 7.

Outlook

For fourth-quarter 2015, Praxair expects earnings within $1.45−$1.52 per share. The forecast assumes an 11% year-over-year negative impact from foreign currency translation.

For 2015, Praxair projects adjusted earnings in the range of $5.78−$5.85, down from $5.80−$5.95 per share predicted earlier. Also, the new guidance reflects a year-over-year increase of 3−4% (excluding currency impact of 11%). Capital spending is expected to be nearly $1.6 billion.

With a market capitalization of $31.5 billion, Praxair currently carries a Zacks Rank #4 (Sell). Better-ranked stocks in the industry include Celanese Corporation CE, Orion Engineered Carbons SA OEC and Stepan Company SCL. All these stocks sport a Zacks Rank #1 (Strong Buy).

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PRAXAIR INC (PX): Free Stock Analysis Report
 
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