Praxair Inc. (PX) reported encouraging third quarter 2011 financial results with adjusted earnings per share (EPS) of $1.40 surpassing the Zacks Consensus Estimate by a penny. Adjusted EPS also rose 16% year over year and achieved the higher end of management’s guided range of $1.35-$1.40.
Revenue
Total revenue in the quarter was $2,896 million, up 14.1% year over year and comprehensively beat the Zacks Consensus Estimate of $2,838 million. The year-over-year upside in revenue was driven by an increased volumes arising from higher manufacturing, metals, energy and chemicals across all geographical regions.
The company also witnessed a 1% sequential rise in revenue attributable to higher volumes. Project backlog at the end of the quarter was $2.7 billion.
During the quarter, North American revenue increased 11% year over year to $1,427 million, primarily driven by strong volumes (7.0% year over year). Revenue in Europe was up 11% to $358 million; while the same in South America rose 20% year over year to $607 million.
Sales in Asia were up 19% to $341 million. Surface Technologies revenue was $163 million in the quarter, up 16% year over year.
Margins
Cost of sales in the quarter grew 16.6% year over year and represented 58.1% of the total revenue. With increased sales volume, prices and cost savings from productivity programs, operating profit shot up by 14.7% year over year to $632.0 million.
SG&A expense in the quarter was $307 million compared with $299 million and R&D expense was $22 million compared with $19 million in the year-ago quarter.
Balance Sheet
Exiting the third quarter, Praxair’s cash and cash equivalents surged 56.3% sequentially to $125.0 million while long-term debt increased 2.2% to roughly $5,809 million.
Cash Flow
In the third quarter, cash flow from operating activities was roughly $732 million versus $596 million in the year-ago quarter. Capital expenditure was $458 million versus $324 million in the third quarter of 2010.
Share Repurchases/Dividends
Praxair pursues a consistent strategy of returning cash to shareholders through dividend payments and share repurchases. During the reported quarter, the company paid $150 million in dividends and repurchased shares worth $251 million, net of issuances.
Outlook
For the fourth quarter of fiscal 2011, management expects EPS in the $1.33-$1.38 range.
The company revised its fiscal 2011 earnings per share guidance to $5.40-$5.45 from the previous estimate of $5.40-$5.50. Sales are expected to be approximately $11.2 billion in comparison with $11 billion expected earlier.
Capital expenditure is expected to be approximately $1.8 billion. Effective tax rate for 2011 is likely to be about 28%.
Praxair is one of the leading companies engaged in the production and distribution of industrial gases, primarily catering to demands in North America, South America, Europe and Asia. Prime competitors of the company include Air Products & Chemicals Inc. (APD) and L'Air Liquide SA.
We have a Neutral recommendation on Praxair over the long term (6-12 months). Currently, Praxair has a Zacks #4 Rank, which implies a Sell rating on a short-term basis.
PRAXAIR INC (PX): Free Stock Analysis Report
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment