Praxair Reports within Expectations – Analyst Blog

Praxair Inc.’s (PX) first quarter earnings for fiscal 2010 were $340 million, representing an increase of 17.2% year over year from $290 million in the year-ago quarter. Reported earnings per share (EPS) were $1.09, in line with the Zacks Consensus Estimate, while increasing from 93 cents in the first quarter of fiscal 2009. EPS was also within the company’s expectations. Net earnings grew based on an increase in total revenue.

 

During the quarter, net revenues were $2,428 million, 14.4% up from $2,123 million during the same period of the previous year. The increase was attributable to the boost in sales volume across most end markets.

 

Revenue from North America, which contributed 51% of total revenue, hiked 6.4% year over year while revenue from Europe grew 11.6%. Revenue generated from South America and Asia moved up 29.7% and 43.3%, respectively. Finally, revenue from Surface Technologies increased 10.6%.

 

Gross profit increased 12.8% and margin grew 60 basis points. Selling, general and administrative (SG&A) expense dropped 40 basis points and research and development (R&D) expense remained flat at $18 million. Operating margin slipped 110 basis points because of the slight decrease in operating expense in relation to increase in total revenue.

 

At the end of first quarter, cash & cash equivalents were $376 million, from just $45 million at the end of the previous quarter. Net debt decreased to $4,457 million from $4,939 million at the end of the fourth quarter of fiscal 2009. Cash flow from operations improved $134 million to $483 million. Capex dropped from $293 million to $288 million. For 2010, management expects capex to be approximately $1.4 billion.

 

For the second quarter of fiscal 2010, management expects EPS to fall to $1.10 − $1.15 and for 2010, it expects EPS in the range of $4.50 − $4.65. Revenue is expected to be approximately $10 billion.

 

Praxair’s intense focus on continuously expanding its reach within its operating regions and adding new customers has accelerated its profit growth, which should continue in the future. Furthermore, Praxair is likely to benefit from the favorable economic environment, given its broad end-market exposure to food and beverage, steel, glass and chemicals.