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Can Praxair (PX) Beat Earnings Estimates This Season?

Zacks Equity Research

Praxair Inc. (PX), the U.S.-based industrial gas producer and supplier, is scheduled to report its second-quarter 2014 results on Jul 23 before the market opens. The Zacks Consensus Estimate for the quarter is pegged at $1.59.

With in-line results recorded in first quarter, let us see whether Praxair will be able to post upbeat results in the second quarter.

Factors to Influence Q2 Results

Industrial production in the U.S. grew 5.5% year over year in the second quarter, including a 6.7% annual hike in manufacturing production and an 18.8% increase in mining production. Favourable industrial activities in the quarter indicate a healthy demand for industrial gases.

To improve its production capabilities so as to benefit from the booming demand, Praxair started several plants in the second quarter. In Jun 2014, the company started a new packaged gas-filling plant in North Dakota, an oxygen supply plant in Uruguay and an air separation plant in Tennessee. Besides starting new plants, Praxair acquired a packaged gas distributor in Western Michigan and expanded its hydrogen production capacity in Niagara Falls.

However, mounting production costs remain a primary matter of concern for Praxair. In the second quarter, the company hiked argon prices to compensate for the rising costs. On Jul 1, prices for industrial, specialty and medical gases were also raised. Further, the company’s high international presence exposes it to risks associated with foreign currency exchange rates, import and export controls, and other economic, political and regulatory policies of local governments.

Earnings Whispers?

Our proven model does not conclusively show that Praxair is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP: Expected Surprise Prediction or ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is currently 0.00%. This indicates in-line earnings for the stock.

Zacks Rank: Praxair’s Zacks Rank #3 (Hold), when combined with a 0.00% ESP makes surprise predictions difficult. We caution against stocks with Zacks Ranks #4 and #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing a negative estimate revision momentum.

Other Stocks to Consider

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

Cytec Industries Inc. (CYT), with Earnings ESP of +3.55% and a Zacks Rank #2 (Buy).

LyondellBasell Industries NV (LYB), with Earnings ESP of +3.13% and a Zacks Rank #2.

Albemarle Corporation (ALB), with Earnings ESP of +0.92% and a Zacks Rank #3.

Read the Full Research Report on PX
Read the Full Research Report on ALB
Read the Full Research Report on LYB
Read the Full Research Report on CYT

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