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Praxair (PX) Beats Q1 Earnings, Down Y/Y; Revenues Lag

Industrial gas producer and supplier Praxair Inc. PX reported better-than-expected results for first-quarter 2016. The company’s adjusted earnings came in at $1.28 per share, above the Zacks Consensus Estimate of $1.26. However, the bottom line declined 10.5% from the year-ago tally of $1.43.

Talking of Praxair’s top-line result, revenues generated in the quarter totaled $2,509 million, below the Zacks Consensus Estimate of $2,537 million. Compared with the year-ago tally, the company’s revenue decreased 9%. The year-over-year fall in revenues was attributable to a 1% decline in organic revenues as well as a negative impact of 7% from foreign currency translation and 1% from lower cost pass-through.

Segmental Details

Praxair operates through five business segments, with their first-quarter 2016 top-line results briefed below:

On a segmental basis, revenues generated in North America decreased 4% year over year to $1,353 million, while that from Europe fell 2% to $320 million. In Asia, however, revenues increased 6% to $376 million. Surface Technologies revenues were $149 million, down from $160 million in the year-ago quarter. Revenues from South America also plunged 22% to $311 million.


In the quarter, Praxair’s cost of sales decreased 9.7% year over year, representing 55% net sales compared with 55.5% recorded in the year-ago quarter. Gross margin improved 50 basis points (bps) to 45%. Selling, general and administrative expenses were down 8.4% year over year to $274 million. Research and development expenses were $23 million, slightly below the year-ago tally of $24 million.

Adjusted operating profit came in at $554 million, down 11.1% year over year. Adjusted margin was 22.1%.

Balance Sheet & Cash Flow

Exiting first-quarter 2016, Praxair had cash and cash equivalents of approximately $221 million versus $147 million at the previous quarter-end. Long-term debt increased to $9,222 million from $8,975 million in the previous quarter.

In this quarter, Praxair generated net cash of $547 million from operating activities, up from $508 million in the year-ago quarter. Capital spent on purchase of property, plant and equipment was $323 million, down 18.6% year over year.

During the quarter, Praxair repurchased shares worth $32 million and paid dividends of $214 million.
Concurrent with the earnings release, Praxair announced that its Board of Directors has approved the payment of a quarterly dividend of 75 cents per share, on Jun 15, 2016 to the shareholders on record as of Jun 7, 2016.


For 2016, Praxair expects earnings in the range of $5.35−$5.70 per share versus $5.30−$5.70 range expected earlier. This is including the negative impact of 7% from adverse foreign currency movements. Excluding the currency impact, earnings growth is predicted in the range of 2–4%. Capital spending is expected to be nearly $1.5 billion and tax rate is likely to be 28%.

For second-quarter 2016, Praxair expects earnings to range between $1.32 per share and $1.39 per share.

With a market capitalization of $33.7 billion, Praxair currently carries a Zacks Rank #2 (Buy). Other stocks worth considering in the chemical industry include Koninklijke DSM N.V. RDSMY, Arkema S.A. ARKAY and Sinopec Shanghai Petrochemical Co. Ltd. SHI. All these stocks sport a Zacks Rank #1 (Strong Buy).

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