Praxair: Earnings Preview

Apr.24.12 | About: Praxair, Inc. (PX)

Industrial gas supplier, Praxair Inc. (NYSE:PX) is slated to release its financial results for the first quarter of 2012 on Wednesday, April 25. The current Zacks Consensus Estimate for first quarter is $1.36, representing a year-over-year growth of 5.59%.

With respect to earnings surprises over the trailing four quarters, Praxair outperformed the Zacks Consensus Estimate in three quarters and underperformed in one. Average earnings surprise came in at a positive 0.57%, implying that the company outdid the Zacks Consensus Estimate by the same magnitude over the last four quarters.

Fourth Quarter and Fiscal Year 2011 Highlights

Praxair reported adjusted earnings per share of $1.36 in the fourth quarter, up 9% over the year-ago 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. In the fiscal year 2011, earnings per share were $5.43, up 15% year over year and $0.01 below the Zacks Consensus Estimate of $5.44.

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 impact. However, sequentially, revenue results plummeted 3.5%. In the fiscal year 2011, total revenue grew 11% to $11,252 million.

Agreement & Magnitude of Estimate Revisions

As for the analysts providing estimates for the stock in the last 30 days, one analyst increased his estimates for the first quarter, fiscal years 2012 and 2013. There was no negative revision of estimates in the last 30 days.

Despite the revision, lack of magnitude kept the estimates for the first quarter and both the fiscal years intact. In the last 30 days, the first quarter estimate stood at $1.36, representing a year-over-growth of 5.59%. Fiscal year 2012 estimate was at $5.83 and 2013 estimate at $6.61. These represented growth of 7.31% and 13.50%, for 2012 and 2013, respectively.

Our Take

Keeping in mind the management's guidance of $1.33-$1.38 for the first quarter, we believe the current quarter's performance will roughly be the same as the fourth quarter of 2011. However, apprehension of negative currency translation impact remains a cause of concern which can even impact earnings performance.

On the other hand, we find the newly announced share buyback program and higher quarterly dividends encouraging along with expectation of growth in North American energy, manufacturing and materials industries. Growth in Asian and South American markets also looks impressive.

We currently maintain a Neutral recommendation on the stock.