Shareholders of industrial gas company
were happy with their investment Wednesday, as the company didn't miss profit estimates, didn't issue unsettling guidance and didn't threaten to slash its dividend.
In fact, quite the opposite. Fourth-quarter earnings were better than expected, the forecast was in line and Praxair said it will actually increase its quarterly payout. For that, the stock was rewarded with a 7.8% rally to $64.
The move higher came after the company reported net income of $200 million, or 64 cents a share, for the quarter. Excluding a charge, Praxair earned $314 million, or $1.01 a share, vs. $316 million and 98 cents a share in the prior-year quarter. Analysts were expecting a profit of 96 cents a share in the quarter, according to a poll by Thomson Reuters.
Sales did decline to $2.40 billion from $2.52 billion a year ago, but excluding the negative effect of foreign currency translation, sales were 2% above the prior year. Wall Street was looking for revenue of $2.43 billion. For the full year, adjusted earnings were up 14% from 2007, and sales rose 15%, in line with estimates.
"Our outlook for 2009 is cautious as we expect the global economy to remain weak. We moved quickly in the fourth quarter to reduce our cost structure and we will continue to drive our costs lower in 2009 by accelerating our productivity initiatives."
As a result, for the first quarter, Praxair expects diluted earnings of 90 cents to 95 cents, compared with forecasts of 91 cents. The outlook assumes a sequential slowdown in volumes and a negative currency impact of about 8% vs. the first quarter of 2008.
Looking to the full year, Praxair said it expects earnings in a range of $3.80 to $4.20 a share on sales between $9.5 billion and $10 billion. Analysts currently expect full-year earnings of $4.07 a share on sales of $10.59 billion, according to Thomson Reuters.
Praxair also expects full-year capital expenditures to be $1.4 billion to $1.5 billion, supporting the current backlog of 42 on-site production plants under contract around the world.
Also on the positive side, Praxair's board approved an increase in the quarterly dividend to 40 cents a share from 37.5 cents. While dividend increases haven't completely disappeared --
all recently upped their payouts -- the tendency to cut dividends is more prevalent.
Several financial companies, including
Bank of America
, as well as
, have all slashed dividends in previous weeks.
That's not to say it was all perfect for Praxair. Higher prices were offset by a big decline in volumes that began in November because of production cutbacks by its customers.
"As we anticipated, volumes dropped dramatically in November and December as our customers in the electronics, chemicals and metals industries cut production in the face of falling commodity prices and weakening demand. Other end markets, including food and beverage, health care, energy and environmental, remained relatively stable," Chairman and Chief Executive Officer Steve Angel said in a statement.
Still, in a time when companies across virtually every sector are feeling the pain of the recession, the occasional bright spots like Praxair should stand out as a reminder that not all is lost for the U.S. economy.
This article was written by a staff member of TheStreet.com.