Industrial gas producer and supplier, Praxair Inc. (PX) reported in-line results for fourth-quarter 2014. Adjusted earnings came in at $1.57 per share, same as the Zacks Consensus Estimate, but roughly 1.3% above the year-ago earnings of $1.55.
For 2014, Praxair’s adjusted earnings were $6.27 per share, up 5.7% from $5.93 recorded in 2013, but in line with the Zacks Consensus Estimate.
Revenue
Praxair generated revenues of $2,990 million in the fourth quarter, down 0.7% year over year. Organic revenue grew 3% driven by project start-ups in the America and Asia, as well as favorable pricing. However, currency translation adversely impacted revenue growth by 4%.
Also, the top line lagged the Zacks Consensus Estimate of $3,067 million.
On a segmental basis, revenues generated in North America increased 1.4% year over year to $1,589 million, while that from Europe declined 11.9% to $356 million. In Asia, revenues climbed 3.3% to $407 million. Surface Technologies revenues were $165 million, up 3.3% year over year. Revenues from South America inched down 1.7% to $473 million.
For 2014, Praxair’s total revenue was $12,273 million, up 2.9% year over year but below the Zacks Consensus Estimate of $12,346 million.
Margins
Praxair’s cost of sales in the quarter slipped 0.6% year over year, representing 56.5% of total revenue versus 56.4% in the year-ago quarter. Selling, general and administrative expenses were down 3.6% year over year to $320 million. Research and development expenses stood at $24 million, slightly below the year-ago tally of $26 million.
Adjusted operating profit came in at $663 million, down 3.9% year over year, while adjusted margin went down 70 basis points to 22.2%.
Balance Sheet
Exiting fourth-quarter 2014, Praxair’s cash and cash equivalents approximately amounted to $126 million, down compared with $168 million recorded in the preceding quarter. Long-term debt increased 7.2% sequentially to $8,669 million.
Cash Flow
In the fourth quarter, Praxair generated net cash of $772 million from its operating activities, down 19.9% year over year. Capital spent on purchase of property, plant and equipment was $482 million, down compared with $516 million spent in the year-ago quarter.
Share Repurchases/Dividends
Praxair follows a consistent policy of rewarding its shareholders through dividend payments and share buybacks. In 2014, the company repurchased stocks worth $862 million and paid dividends amounting to $759 million.
Concurrent with the earnings release, Praxair announced a 10% increase in its quarterly cash dividend rate. The increased rate now stands at 71.5 cents per share and will be paid on Mar 16, 2015 to shareholders of record as on Mar 6.
Outlook: For first-quarter 2015, Praxair expects earnings per share in the $1.39−$1.47 range. The forecast assumes 7% year-over-year negative foreign currency translation impact.
For 2015, Praxair projects earnings in the range of $6.15−$6.50 per share, reflecting a year-over-year increase of 5−11%.
Sales are anticipated within $12−$12.4 billion, including a negative impact of roughly 6% from foreign currency translation.
Capital spending is expected to be nearly $1.7 billion and the effective tax rate is estimated at 28%.
With a market capitalization of $35.9 billion, Praxair currently carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the industry include Compass Minerals International Inc. (CMP), Innophos Holdings Inc (IPHS) and Olin Corp. (OLN). All these stocks sport a Zacks Rank #1 (Strong Buy).
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