Industrial gas producer and supplier Praxair Inc. PX reported in-line results for second-quarter 2015. The company’s adjusted earnings of $1.45 per share came at par with the Zacks Consensus Estimate, while declining 8.2% from the year-ago tally of $1.58. The year-over-year decline was primarily triggered by uncertain global economic conditions and unfavorable foreign currency movements.

Adjusted bottom line excluded an expense of 39 cents per share related to cost-reduction measures. These were initiated to counter weak demand resulting from softness in emerging and energy-related end-markets.

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Revenue

Praxair generated net sales of $2,738 million in second-quarter 2015, decreasing 12% year over year. Also, the figure lagged the Zacks Consensus Estimate of $2,904 million. The year-over-year fall in revenues was led by a 1% decline in organic revenues as well as negative impact of 9% from foreign currency translation and 2% from lower cost pass-through.

On a segmental basis, revenues generated in North America decreased 9% year over year to $1,482 million; while that from Europe fell 18.9% to $331 million. In Asia, revenues inched down 1.8% to $387 million. Surface Technologies revenues were $150 million, down 13.8% year over year. Revenues from South America declined 23.8% to $388 million.

As revealed, the company’s business suffered from weaker industrial activities in Brazil and China as well as lower demand in the metals, energy and manufacturing end-markets in the U.S.

Margins

Praxair’s cost of sales in the quarter decreased 14.2% year over year, representing 55.4% of net sales versus 56.8% recorded in the year-ago quarter. Selling, general and administrative expenses were down 11.3% year over year to $297 million. Research and development expenses were $23 million, slightly below the year-ago tally of $24 million.

Adjusted operating profit came in at $626 million, down 10.2% year over year; while adjusted margin rose 50 basis points to 22.9%.

Balance Sheet

Exiting second-quarter 2015, Praxair had cash and cash equivalents of approximately $136 million, up compared with $117 million in the preceding quarter. Long-term debt inched up 0.5% sequentially to $8,813 million.

Cash Flow

Praxair’s net cash generation from operating activities totaled $707 million, down compared with $847 million in the year-ago quarter. Capital spent on purchase of property, plant and equipment was $352 million, up from the year-ago tally of $384 million.

During the quarter, Praxair repurchased stocks worth $234 million and paid dividends amounting to $205 million.
 
Concurrent with the earnings release, Praxair announced that its board of directors has approved the payment of a quarterly dividend of 71.5 cents per share on Sep 15, 2015 to shareholders of record as on Sep 8. In addition, a new share buyback program worth $1.5 billion has been authorized.

Outlook

For third-quarter 2015, Praxair expects earnings within $1.42−$1.49 per share. The forecast assumes a 12% year-over-year negative foreign currency translation impact.

For 2015, Praxair projects adjusted earnings in the range of $5.80−$5.95, down from $5.90−$6.15 per share predicted earlier. Also, the new guidance reflects a year-over-year increase of 3−6% (excluding currency impact of 11%).

Capital spending is expected to be nearly $1.6 billion and the effective tax rate is estimated at 28%.

With a market capitalization of $33.3 billion, Praxair currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the industry include Albemarle Corp. ALB, Innospec Inc. IOSP and Orion Engineered Carbons SA OEC. All these stocks sport a Zacks Rank #1 (Strong Buy).

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