Will Demand & Contract Wins Aid Praxair's (PX) Q4 Earnings?

Industrial gas producer and supplier Praxair Inc. (NYSE:PX) is scheduled to report fourth-quarter 2017 results on Jan 25, before the market opens.

In three of the last four quarters, the company’s earnings were better-than-expected and in line in one. Average earnings surprise was a positive 2.32%. Notably, in the last quarter, the company’s earnings of $1.50 per share surpassed the Zacks Consensus Estimate by 4.17%.

In the last three months, the company’s shares have yielded 12.4% return, outperforming the gain of 6.6% recorded by the industry.



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

What’s Influencing Q4 Results?

We believe that increasing application of industrial gases in manufacturing, transportation, healthcare, food and beverages, and metal fabrication industries is an advantage for Praxair. This, along with the company’s initiatives to improve its products and services, has helped it win many contracts over time. Exiting third-quarter 2017, the company had a solid backlog of $1.5 billion.

In the fourth quarter, the company signed long-term agreements with BASF and Samsung (KS:005930) to build and operate a new syngas processing plant and an air separation plant, respectively, for them. It has also won a long-term gas supply contract from GLOBALFOUNDRIES and Shanghai Huali Microelectronics Corporation. We believe these contract wins will be beneficial for Praxair.

In addition, we expect international diversification to increase Praxair’s profitability in the quarters ahead. Business in North America will get a boost from strengthening demand in various end markets while that in Asia will improve on the back of growing electronics end market and new project wins. In Europe, volume growth in food and beverage market will be advantageous. Praxair Surface Technologies business will benefit from the aerospace market.

For the fourth quarter, Praxair expects earnings per share to be within $1.45-$1.50. Despite all the positives, earnings growth in the quarter will be partially offset by adverse impact of 2 cents from the hurricanes.

Why a Likely Positive Surprise?

Our proven model provides some idea on the stocks that are about to release their 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 a likely earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

That is the case for Praxair as you will see below.

Zacks ESP: Earnings ESP is currently +0.17%, as the Most Accurate estimate of $1.49 is above the Zacks Consensus Estimate of $1.48.

Praxair, Inc. Price and EPS Surprise