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Praxair (PX) Posts In-Line Q4 Earnings; Hikes Dividend

Industrial gas producer and supplier Praxair Inc.PX reported in-line bottom-line results for fourth-quarter 2016. The company's adjusted earnings came in at $1.41 per share, same as the Zacks Consensus Estimate. However, the bottom line lagged the year-ago tally of $1.47 by 4.1%.

For 2016, the company's adjusted earnings came in at $5.48 per share, in line with the Zacks Consensus Estimate but 5.5% below the year-ago tally of $5.80.

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Revenues

In the quarter, Praxair generated revenues of $2.644 billion, up 1.9% year over year but below the Zacks Consensus Estimate of $2.67 billion.

The year-over-year increase in revenues was driven by 1% gain from acquired assets, 1% cost pass-through and 1% impact from favorable pricing. The positives were partially offset by 1% negative impact from unfavorable foreign currency movements.

The company operates through five business segments, with their fourth quarter top-line results briefed below:

On a segmental basis, revenues generated in North America decreased 2% year over year to $1,397 million, while that from Europe grew 9% to $351 million. In Asia, revenues slipped 1% to $395 million. Surface Technologies revenues were $149 million, down from $152 million in the year-ago quarter. Revenues from South America increased 18% to $352 million.

For 2016, the company's revenues totaled $10.534 billion, in line with the Zacks Consensus Estimate but down 2.2% year over year.

Margins

In the quarter, Praxair's cost of sales increased 3.6% year over year, representing 55.9% net sales compared with 55% recorded in the year-ago quarter. Gross margin decreased 90 basis points (bps) to 44.1%. Selling, general and administrative expenses decreased 1.1% year over year to $272 million. Research and development expenses were flat at $23 million.

Adjusted operating profit came in at $599 million, down 4% year over year. Adjusted margin was 22.7%.

Balance Sheet & Cash Flow

Exiting the fourth quarter, Praxair had cash and cash equivalents of $524 million, down from $627 million in the preceding quarter. Long-term debt was down 3.3% sequentially to $8,917 million.

In this quarter, Praxair generated net cash of $726 million from its operating activities, down from $791 million in the year-ago quarter. Capital spent on purchase of property, plant and equipment was $409 million, up 5.7% year over year.

During the quarter, Praxair repurchased shares worth $95 million and paid dividends of $214 million.

Concurrent with the earnings release, Praxair announced that its board of directors has approved a 5% increase in its quarterly dividend rate. The new rate now stands at 78.75 cents per share, up from the previous rate of 75 cents.

The revised dividend will be paid on Mar 15, 2017, to shareholders on record as of Mar 7.

Outlook

For 2017, Praxair anticipates earnings to be within $5.45-$5.80 per share. Excluding 3% negative impact of foreign currency headwinds, earnings are predicted to grow 2-9% year over year. Capital spending is expected to be nearly $1.4 billion and tax rate is expected to be 28%.

For the first quarter of 2017, Praxair expects earnings in a range of $1.28 to $1.35 per share. Adverse forex impact is expected to be 1%.

Praxair, Inc. Price and Consensus

Praxair, Inc. Price and Consensus | Praxair, Inc. Quote

Zacks Rank & Stocks to Consider

With a market capitalization of $34.1 billion, Praxair currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the chemical diversified industry include BASF SE BASFY , Kronos Worldwide, Inc. KRO and Methanex Corporation MEOH . All these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

BASF SE has a positive average earnings surprise of 34.34% for the last four quarters. Also, earnings expectations for 2017 have improved over the past 60 days.

Kronos Worldwide, Inc.'s financial performance has been impressive in the last quarter, with a positive earnings surprise of 111.11%. Also, the stock's earnings estimates for 2017 have been revised upward over the last 60 days.

Methanex Corporation has witnessed positive revisions in earnings estimates for 2017 over the past 60 days. Also, the company posted a positive earnings surprise of 42.86% in the last quarter.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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