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Praxair (PX) to Report Q3 Earnings: What's in the Cards?

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Praxair, Inc. is scheduled to report third-quarter 2018 results on Oct 25, before the opening bell.

The industrial gas producer and supplier put up an impressive show in the last four quarters. The average earnings surprise was a positive 3.46%. Notably, in the last reported quarter, the company’s earnings of $1.72 per share surpassed the Zacks Consensus Estimate by 1.18%.

Praxair’s shares have outperformed the industry it belongs to over the past year. The stock has gained around 12%, while the industry recorded a loss of 15% during the same time frame.


Let us see how things are shaping up for Praxair prior to this earnings announcement.
 
Key Factors to Consider

Praxair is expected to benefit from pricing cost management, prudent investments in project backlog, as well as a focused and disciplined capital-allocation process in the third quarter. Increasing application of industrial gases in manufacturing, transportation, healthcare, food and beverages, and metal fabrication industries will also aid Praxair’s performance.

Further, the company’s initiatives to improve its products and services have helped it win many contracts. Exiting second-quarter 2018, the company had a solid backlog of $1.7 billion. However, currency headwind, inflation, as well as rising freight and logistics costs will impair Praxair’s results.
 
The Zacks Consensus Estimate for earnings for the third quarter is currently pegged at $1.70, reflecting a 13% year-over-year increase.  Revenues for the quarter are pegged at $3 billion, up 3.8% year over year.

Praxair, Inc. Price and EPS Surprise

 

Praxair, Inc. Price and EPS Surprise | Praxair, Inc. Quote

For the North America segment, Praxair will gain from rising demand for gases for industrial use, especially in the metals, chemicals, downstream energy and manufacturing end markets. The Zacks Consensus Estimate for the North America segment’s revenues is pegged at $1,592 million, underlining year-over-year growth of roughly 5%.

Praxair’s performance in the South American segment continues to lag the rest of the world due to sluggish economic conditions in Brazil. During the Jun-end quarter, the manufacturing end market was quite weak from a nationwide Brazilian trucker strike that contributed to a negative 7% year-over-year industrial production rate in May 2018. The conditions are expected to remain challenging for the quarter to be reported mainly due to the strengthening of the U.S. dollar, along with global trade concerns and political uncertainty. The Zacks Consensus Estimate for the South America segment’s revenues is pegged at $341 million, indicating 12% year-over-year decline.
 
The Zacks Consensus Estimate for the Asia segment’s revenues is pinned at $494 million in the Sep-end quarter, up around 10% year over year. For the Europe segment, manufacturing and metals industries are demanding more industrial gases. Per the Zacks model, the segment is expected to log sales of $432 million in the third quarter, reflecting 6% year-over-year improvement.

Earnings Whisper
 
Our proven model provides some idea on the stocks that are about to release earnings results. Per the model, a stock needs to have a combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy) or 2 (Buy) or 3 (Hold) for an earnings beat to be likely. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
 
That is not the case for Praxair as you will see below.
 
Earnings ESP: Earnings ESP for the company is +0.49%.
 
Zacks Rank: Praxair has a Zacks Rank #4 (Sell), which reduces the predictive power of ESP. Notably, we caution against stocks with a Zacks Ranks #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.
 
Stocks to Consider
 
Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Arch Coal Inc. (ARCH - Free Report) has an Earnings ESP of +6.32% and a Zacks Rank #1. Its shares have gained 26% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.

CF Industries Holdings, Inc. (CF - Free Report) has an Earnings ESP of +12.07% and a Zacks Rank #1. The stock has surged 40% in a year’s time.

Allegheny Technologies Incorporated (ATI - Free Report) has an Earnings ESP of +2.16% and a Zacks Rank #3. The company’s shares have been up 12% in the past year.

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