Industrial gas producer and supplier Praxair Inc. PX reported in-line results for first-quarter 2015. Adjusted earnings came in at $1.43 per share, at par with the Zacks Consensus Estimate, but roughly 5.3% below the year-ago earnings of $1.51.
The year-over-year decline was primarily triggered by uncertain global economic conditions and unfavorable foreign currency movements.
Revenue
Praxair’s revenues totaled $2,757 million in first-quarter 2015, down 8.9% year over year. Organic revenue growth of 1% was more than offset by 8% negative impact from foreign currency translation and 2% lower cost pass-through.
Also, the top line lagged the Zacks Consensus Estimate of $2,960 million.
On a segmental basis, revenues generated in North America decreased 5.1% year over year to $1,499 million; while that from Europe declined 17.9% to $326 million. In Asia, revenues fell 5.4% to $371 million. Surface Technologies revenues were $160 million, down 5.3% year over year. Revenues from South America declined 17.8% to $401 million.
Margins
Praxair’s cost of sales in the quarter decreased 11.4% year over year, representing 55.5% of total revenue versus 57% in the year-ago quarter. Selling, general and administrative expenses were down 8.3% year over year to $299 million. Research and development expenses stood at $24 million, slightly above the year-ago tally of $23 million.
Adjusted operating profit came in at $623 million, down 7.7% year over year; while adjusted margin went up 30 basis points to 22.6%.
Balance Sheet
Exiting first-quarter 2015, Praxair had cash and cash equivalents of approximately $117 million, down compared with $126 million in the preceding quarter. Long-term debt climbed 1.2% sequentially to $8,771 million.
Cash Flow
In the first quarter, Praxair generated net cash of $508 million from its operating activities, down 5.2% year over year. Capital spent on purchase of property, plant and equipment was $397 million, slightly higher than $393 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. During the first quarter, the company repurchased stocks worth $235 million and paid dividends amounting to $207 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 Jun 15, 2015 to shareholders of record as on Jun 5.
Outlook: For second-quarter 2015, Praxair expects earnings within $1.40−$1.48 per share. The forecast assumes an 11% year-over-year negative foreign currency translation impact.
For 2015, Praxair projects earnings in the range of $5.90−$6.15 per share, down from $6.15−$6.50 per share predicted earlier. The new guidance reflects a year-over-year increase of 4−8% (excluding currency impact).
Sales are anticipated within $11.4−$11.7 billion, down compared with the previous projection of $12−$12.4 billion. The revised guidance takes into account a negative impact of 10% from foreign currency translation compared with 2014.
Capital spending is expected at nearly $1.6 billion (slightly below the earlier prediction of $1.7 billion) and the effective tax rate is estimated at 28%.
With a market capitalization of $35.4 billion, Praxair currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the industry include Celanese Corporation CE, Cytec Industries Inc. CYT and LyondellBasell Industries N.V. LYB. All these stocks hold a Zacks Rank #2 (Buy).
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