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Why Is Praxair (PX) Up 4.5% Since the Last Earnings Report?
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More than a month has gone by since the last earnings report for Praxair, Inc. (PX - Free Report) . Shares have added about 4.5% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Third-Quarter 2017 Earnings Highlights
Praxair Inc. reported impressive bottom-line results for third-quarter 2017, delivering a positive earnings surprise of 4.2%. This is the third consecutive quarter of better-than-expected bottom-line results.
Adjusted earnings in the quarter were $1.50 per share, beating the Zacks Consensus Estimate of $1.44 and roughly 6.4% above the year-ago tally of $1.41. Earnings were driven by healthy sales growth in all business segments, partially offset by rise in cost of sales and operating expenses.
Segmental Results Drive Revenues: The company's third-quarter sales totaled $2,922 million. Revenues exceeded the Zacks Consensus Estimate of $2.87 billion while surpassed the year-ago tally by 7.6%.
The year-over-year improvement was driven by 5% gain from volume growth, 1% from favorable pricing, 1% from cost pass-through and 1% positive impact from currency translation. Businesses in manufacturing, healthcare, electronics, chemicals, metals, energy and food and beverage end markets were strong.
Backlog was $1.5 billion at the quarter end.
The company operates through five business segments. Their top-line results for the quarter are briefed below:
Revenues generated in North America grew 6.1% year over year to $1,518 million. The segment's revenues represented 52% of total revenues.
Revenues in Europe, representing 13.9% of total revenues, increased 11.2% to $407 million.
In Asia, revenues increased 15.3% to $451 million and represented 15.4% of total revenues.
Surface Technologies revenues were $157 million, above $150 million in the year-ago quarter. The segment's revenues represented 5.4% of total revenues.
Revenues from South America increased 2.9% to $389 million. It represented 13.3% of total revenues.
High Costs & Expenses Hurt Margins: In the quarter, Praxair's costs of sales increased 7.8% year over year. It represented 56.5% of third-quarter sales versus 56.4% in the year-ago quarter. Gross margin declined 10 basis points (bps) to 43.5%. Selling, general and administrative expenses were $304 million, up 4.5% year over year. Research and development expenses were $23 million.
Adjusted operating profit in the quarter grew 7.5% year over year to $642 million while adjusted operating margin was flat at 22%.
Balance Sheet & Cash Flow: Exiting the third quarter, Praxair's cash and cash equivalents were $607 million, up from $535 million in the preceding quarter. Long-term debt increased 81 bps sequentially to $8,243 million.
In the quarter, the company generated net cash of $794 million from its operating activities, up 0.8% year over year. Capital spent on purchase of property, plant and equipment totaled $320 million, down from $376 million spent in the year-ago quarter.
During the quarter, Praxair paid dividends of $225 million.
Outlook: For 2017, Praxair anticipates benefitting from a talented workforce, sound product portfolio and new project wins. Also, the company is working on its business combination deal with Linde AG, having received its shareholders' approval about the deal during the third quarter. The completion of the deal is still subject to certain regulatory approvals and satisfaction of certain closing conditions.
The company raised its earnings guidance to $5.78-$5.83, reflecting 12 cents increase at mid-point compared with the previous guidance of $5.63-$5.75. Capital spending is expected to be nearly $1.4 billion.
For the fourth quarter of 2017, the company expects earnings in the range of $1.45-$1.50 per share. This projection includes 2 cents per share of adverse impact from hurricanes on the company’s business.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed an upward trend in fresh estimates. There has been one revision higher for the current quarter.
At this time, Praxair's stock has an average Growth Score of C, while it is lagging a lot on the momentum front with F. The stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is equally suitable for value and growth investors.
Outlook
Estimates have been trending upward for the stock. The magnitude of these revisions also looks promising. It comes with little surprise that the stock has a Zacks Rank #2 (Buy). We are expecting an above average return from the stock in the next few months.
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Why Is Praxair (PX) Up 4.5% Since the Last Earnings Report?
More than a month has gone by since the last earnings report for Praxair, Inc. (PX - Free Report) . Shares have added about 4.5% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Third-Quarter 2017 Earnings Highlights
Praxair Inc. reported impressive bottom-line results for third-quarter 2017, delivering a positive earnings surprise of 4.2%. This is the third consecutive quarter of better-than-expected bottom-line results.
Adjusted earnings in the quarter were $1.50 per share, beating the Zacks Consensus Estimate of $1.44 and roughly 6.4% above the year-ago tally of $1.41. Earnings were driven by healthy sales growth in all business segments, partially offset by rise in cost of sales and operating expenses.
Segmental Results Drive Revenues: The company's third-quarter sales totaled $2,922 million. Revenues exceeded the Zacks Consensus Estimate of $2.87 billion while surpassed the year-ago tally by 7.6%.
The year-over-year improvement was driven by 5% gain from volume growth, 1% from favorable pricing, 1% from cost pass-through and 1% positive impact from currency translation. Businesses in manufacturing, healthcare, electronics, chemicals, metals, energy and food and beverage end markets were strong.
Backlog was $1.5 billion at the quarter end.
The company operates through five business segments. Their top-line results for the quarter are briefed below:
Revenues generated in North America grew 6.1% year over year to $1,518 million. The segment's revenues represented 52% of total revenues.
Revenues in Europe, representing 13.9% of total revenues, increased 11.2% to $407 million.
In Asia, revenues increased 15.3% to $451 million and represented 15.4% of total revenues.
Surface Technologies revenues were $157 million, above $150 million in the year-ago quarter. The segment's revenues represented 5.4% of total revenues.
Revenues from South America increased 2.9% to $389 million. It represented 13.3% of total revenues.
High Costs & Expenses Hurt Margins: In the quarter, Praxair's costs of sales increased 7.8% year over year. It represented 56.5% of third-quarter sales versus 56.4% in the year-ago quarter. Gross margin declined 10 basis points (bps) to 43.5%. Selling, general and administrative expenses were $304 million, up 4.5% year over year. Research and development expenses were $23 million.
Adjusted operating profit in the quarter grew 7.5% year over year to $642 million while adjusted operating margin was flat at 22%.
Balance Sheet & Cash Flow: Exiting the third quarter, Praxair's cash and cash equivalents were $607 million, up from $535 million in the preceding quarter. Long-term debt increased 81 bps sequentially to $8,243 million.
In the quarter, the company generated net cash of $794 million from its operating activities, up 0.8% year over year. Capital spent on purchase of property, plant and equipment totaled $320 million, down from $376 million spent in the year-ago quarter.
During the quarter, Praxair paid dividends of $225 million.
Outlook: For 2017, Praxair anticipates benefitting from a talented workforce, sound product portfolio and new project wins. Also, the company is working on its business combination deal with Linde AG, having received its shareholders' approval about the deal during the third quarter. The completion of the deal is still subject to certain regulatory approvals and satisfaction of certain closing conditions.
The company raised its earnings guidance to $5.78-$5.83, reflecting 12 cents increase at mid-point compared with the previous guidance of $5.63-$5.75. Capital spending is expected to be nearly $1.4 billion.
For the fourth quarter of 2017, the company expects earnings in the range of $1.45-$1.50 per share. This projection includes 2 cents per share of adverse impact from hurricanes on the company’s business.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed an upward trend in fresh estimates. There has been one revision higher for the current quarter.
Praxair, Inc. Price and Consensus
Praxair, Inc. Price and Consensus | Praxair, Inc. Quote
VGM Scores
At this time, Praxair's stock has an average Growth Score of C, while it is lagging a lot on the momentum front with F. The stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is equally suitable for value and growth investors.
Outlook
Estimates have been trending upward for the stock. The magnitude of these revisions also looks promising. It comes with little surprise that the stock has a Zacks Rank #2 (Buy). We are expecting an above average return from the stock in the next few months.