Praxair Inc. (PX) reported encouraging first quarter 2011 financial results. The company reported adjusted earnings per share of $1.29 for the quarter, above the Zacks Consensus Estimate of $1.27 and up 18% year over year. The results also surpassed management’s guidance range of $1.23-$1.28.
Revenue
Total revenue in the quarter was $2,702 million, up 11% year over year. Increased revenue was driven by an increased volume, as sales boosted in all geographical operating areas mainly in electronics, manufacturing, metals and chemicals markets. Prices were also strong in the quarter.
In the quarter, North American revenue increased 8% year over year to $1,334 million. Revenue in Europe was up 4% on a constant currency basis and totalled $343 million; while in South America it was $558 billion, up 22% year over year. Sales in Asia were up 20% to $310 million. Surface Technologies revenue was $157 million in the quarter, up 15% year over year.
Margins
Cost of sales in the quarter grew 11.2% year over year and represented 56.8% of total revenue. With an increased sales volume, prices and productivity, operating profit shot up by 17% year over year to $591 million. SG&A expense in the quarter was $308 million compared with $294 million and R&D expense was $22 million compared with $18 million in the year-ago quarter.
Balance Sheet
Exiting the first quarter, Praxair had cash and cash equivalents of approximately $86 million, up compared with $39 million in the previous quarter. Long-term debt increased roughly to $5,481 million compared with $5,155 million in the fourth quarter of 2010.
Cash Flow
In the first quarter, cash flow from operating activities was roughly $359 million versus $483 million in the year-ago quarter. Capital expenditure was $334 million versus $288 million in the first quarter of 2010.
Share Repurchases/Dividends
Praxair follows a consistent policy of returning cash to shareholders via dividend payments and share repurchases. During the first quarter of 2011, the company paid dividends amounting to $152 million and repurchased shares worth $215 million.
Outlook
For the second quarter of fiscal 2011, management provided EPS guidance roughly in the $1.33-$1.38 range. The company expects full year 2011 EPS to be in the range of $5.35-$5.45 (versus previous estimate of $5.25-$5.40).
Full year, sales are expected to be approximately $11 billion and capital expenditure is expected to be in the range of $1.6 to $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.
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