Industrial gas producer and supplier, Praxair Inc. (PX), recently announced changes in the exchange rates used for converting the results of its Venezuelan business. This change will adversely impact its fourth-quarter 2014 and 2015 results. The news weakened market sentiments, leading to a fall of nearly 0.76% in the company’s share price on Jan 16.
As disclosed, effective Dec 31, 2014, Praxair replaced the Venezuelan government’s official exchange rate of 6.3 bolivars per U.S. dollar with the Venezuelan government’s SICAD II currency exchange system rate of approximately 50 bolivars per U.S. dollar.
Also, Praxair hinted that the exchange rate replacement will result in a charge of roughly $131 million, to be recorded in fourth-quarter results. Further, it will impact the company’s 2015 revenues and earnings to the tune of $100 million and 7 cents per share, respectively.
We believe the financial impact of this change will lower earnings growth expectations for Praxair, as evident from the stock market reaction to the news. Over the last 7 days, the Zacks Consensus Estimate for the company had decreased by 0.4% to $6.78 for 2015. Also, the company has an Earnings ESP of -0.74% for the year.
Praxair is slated to report fourth-quarter 2014 results on Jan 28, 2015.
With a market capitalization of $36 billion, Praxair currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the diversified chemical industry include Kronos Worldwide, Inc. (KRO), Olin Corp. (OLN) and Air Products & Chemicals Inc. (APD). While both Kronos Worldwide and Olin Corp. sport a Zacks Rank #1 (Strong Buy), Air Products & Chemicals carries a Zacks Rank #2 (Buy).
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