Praxair (PX) to Report Q4 Earnings: What's in the Cards?

Industrial gas producer and supplier Praxair Inc.PX is scheduled to report fourth quarter and full-year 2016 results on Jan 26, before the market opens.

The company posted better-than-expected results in three of the last four quarters, while recording in-line results in one. Average earnings surprise was a positive 1.32%. Its shares yielded 21.38% return, underperforming the return of 35.09% recorded by the Zacks categorized Chemicals-Diversified industry, while outperforming the return of 17.81% provided by the S&P 500 market in the last one year.

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

Factors to Affect Q4 Results

We believe that Praxair might have benefited from its organic and inorganic growth efforts as well as its research and development expertise in the fourth quarter. Important contracts won or expansion initiatives during the quarter include startup of a new carbon dioxide purification and liquefaction plant at the Delaware refinery, expansion of an on-site business for wastewater customers in China and a contract from MEGlobal to supply oxygen and nitrogen to the latter's new ethylene glycol plant. Also, the company formed a joint venture with GE Aviation to work on specialized coatings. The company anticipates its revenues sourced from GE association will increase to roughly $200 million in the next three to four years. In addition, the company's start-ups projects in Antwerp and Peru will prove to be a prime driving force.

In addition, we believe that growing application of industrial gases, for instance, hydrogen in the refining industry, oxygen in healthcare, and nitrogen and carbon dioxide in oil and gas industry is advantageous for Praxair.

Despite the positives, Praxair's exposure to risks arising from higher production costs, stiff competition, and high debt levels might have adversely impacted its financials in the fourth quarter. The company expects earnings to range between $1.36 and $1.43 per share in the quarter, below $1.47 recorded in the year-ago quarter.

Also, the company has lowered its full-year earnings guidance due to expectations of weaker manufacturing and metal volumes, especially in North America. Also, forex woes are likely to adversely impact earnings by 3%.

Earnings Whispers

Our proven model does not conclusively show that Praxair will be able to pull an earnings surprise this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to beat earnings. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

That is not the case here as you will see below.

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate of $1.40 and the Zacks Consensus Estimate of $1.41, currently stands at -0.71%.

Praxair, Inc. Price, Consensus and EPS Surprise

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

Zacks Rank: Praxair's Zacks Rank #3, when combined with a negative ESP makes surprise prediction difficult.

Note that we caution against stocks with a Zacks Rank #4 or #5 (Sell-rated stocks) going into earnings announcement, especially when the company is seeing a negative estimate revisions momentum.

Stocks to Consider

Here are some companies you may want to consider in the chemical industry as our model shows they have the right combination of elements to post an earnings beat this quarter:

Methanex Corporation MEOH , with an Earnings ESP of +53.33% and a Zacks Rank #1. You can see the complete list of today's Zacks #1 Rank stocks here .

Albemarle Corporation ALB , with an Earnings ESP of +2.67% and a Zacks Rank #2.

Celanese Corporation CE , with an Earnings ESP of +0.66% and a Zacks Rank #2.

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Praxair, Inc. (PX): Free Stock Analysis Report

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Celanese Corporation (CE): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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