PX 4Q up Y/Y, Misses Estimate

Industrial gas producer, Praxair Inc. (PX - Analyst Report) reported its fourth quarter financial results with adjusted earnings per share of $1.36, representing a 9% increase over the year-ago comparable quarter and close to management’s guidance range of $1.33-$1.38. Results, however, plummeted 2.9% sequentially and fell short of the Zacks Consensus Estimate of $1.37.

For the fiscal year 2011, earnings per share were $5.43, up 15% year over year and one cent below the Zacks Consensus Estimate of $5.44.

Revenue: Total revenue in the fourth quarter was $2,796 million, up 7% year over year, driven by increased volumes and prices. The positive momentum got restricted due to negative currency translation impacts. However, sequentially, revenue results plummeted 3.5%.

During the quarter, North American revenue increased 6.8% year over year to $1,399 million. Revenue in Europe was up 12.1% to $380 million; while the same in South America rose 3.1% year over year to $532 million. Sales in Asia were up 5.5% to $325 million. Surface Technologies revenue was $160 million in the quarter, up 6.7% year over year.

For the fiscal year 2011, total revenue grew 11% to $11,252 million. The year-over-year growth stems from a 6% volume increase, 2% positive price/mix impact, a 1% cost pass through, in addition to a 3% positive currency impact and 1% negative acquisition impact. Project backlog at the end of the year was $2.7 billion.

Margins: Cost of sales in the quarter grew 7.1% year over year and represented 57.2% of the total revenue. With increased sales volume, prices and cost savings from productivity programs, operating profit shot up by 22.4% year over year. Margins stood at 22.1% versus 19.3% in the year-ago quarter.

Balance Sheet: Exiting the fourth quarter, Praxair’s cash and cash equivalents plummeted 28% sequentially to $90.0 million while long-term debt increased 0.5% to roughly $5,838 million.

Cash Flow: In the fourth quarter, cash flow from operating activities was roughly $791 million versus $290 million in the year-ago quarter. Capital expenditure was $572 million versus $451 million in the fourth quarter of 2010.

Share Repurchases/Dividends: Praxair pursues a consistent strategy of returning cash to shareholders through dividend payments and share repurchases. During the fiscal year 2011, the company paid $602 million in dividends and repurchased shares worth $742 million, net of issuances.

Along with the quarterly results, the company’s board of directors approved a new $1.5 billion of share repurchase program to be financed by the existing cash and debt. The board also increased the company’s quarterly dividend rate by 10% to 55 cents from 50 cents earlier. The revised dividend will be paid on March 15, 2012 to common shareholders of record on March 7, 2012.

Outlook: For the first quarter of fiscal 2012, management expects EPS in the $1.33-$1.38 range, including 7cents of negative currency translation impact. For the fiscal year 2012, EPS is expected to be within $5.70-$5.90, including 25 cents of negative currency translation impact. Sales for 2012 are expected to be approximately within $11.7-$12 billion range. Capital spending is likely to approximate $2.1-$2.4 billion while effective tax rate is expected to be 28%.

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