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Praxair Q3 Earnings Rise but Lags Est.

Zacks Equity Research

Industrial gas producer and supplier, Praxair Inc. (PX) reported adjusted earnings per share of $1.51 for the third quarter of 2013, up 8.6% year over year and one cent below the Zacks Consensus Estimate of $1.52.

The adjusted earnings result for the quarter excludes $0.02 per share of pension settlement related charge. Including this, GAAP earnings per share in the quarter were $1.49.

Revenue: Praxair’s total sales in the third quarter increased 8.6% year over year to $3,013 million. Results were below the Zacks Consensus Estimate of $3,021 million. The revenue increase can be attributed to 5% contribution from volume growth, 2% from favorable prices and 3% contributions from acquisitions. These were partially offset by 1% negative impact from foreign currency translation risks.

Backlog at the end of the third quarter 2013 was roughly $2 billion.
In the quarter, revenues generated from North America were up 14.2% year over year while that from Europe increased 9.7%. Revenue from South America decreased 4.3% and Asia went up 7.5%. Surface Technologies revenue was at $160 million in the quarter, up 1.9% from the year-ago quarter.

Margins: Cost of sales in the quarter increased 6.4% year over year and represented 56.3% of the total revenue. Adjusted operating profit for Praxair in the quarter was $679 million, up 9% year over year while adjusted margin stood at 22.5%.
Balance Sheet: Exiting the third quarter 2013, Praxair had cash and cash equivalent balance of $134 million, up 31.4% from $102 million reported in the previous quarter. Long-term debt balance increased 0.25% sequentially to $7,883 million.

Cash Flow: Praxair generated net cash of $904 million from operating activities in the third quarter, up from $746 million in the year-ago quarter. Capital spending went down 5.7% to $516 million, with a major portion being invested for a new production plant setting.

Share Repurchases/Dividends: Praxair pursues a consistent strategy of returning cash to shareholders through dividend payments and share repurchases. During the third quarter 2013, the company paid $176 million in dividends and repurchased shares worth $113 million.

Alongside the quarterly results, Board of Directors of Praxair declared a quarterly dividend of 60 cents to be paid on Dec 16, 2013 to its shareholders of record as on Dec 6, 2013.

Outlook: For the fourth quarter of 2013, management projects earnings per share to be within the $1.52-$1.57 per share range.

For 2013, adjusted earnings per share are expected to be within $5.90-$5.95 range as against $5.90-$6.00 range expected earlier while GAAP earnings are expected to be within $5.80-$5.85 versus prior expectation of $5.82-$5.92. The revised guidance includes the impact of Praxair’s cautious approach towards volume growth in the fourth quarter.

Sales are expected to be roughly $12 billion for the full year. Capital spending is expected to be $1.9 billion and adjusted effective tax rate guidance is projected to be 28%.

Praxair Inc. is the largest industrial gas producer and supplier in the Americas and one of the leading gas producing companies worldwide. The stock currently carries a Zacks Rank #2 (Buy).

Other stocks to watch out for in the industry are E. I. du Pont de Nemours and Company (DD), PPG Industries Inc. (PPG) and Air Products & Chemicals Inc. (APD), each carrying a Zacks Rank #2 (Buy).

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Read the Full Research Report on PX
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