Industrial gas producer and supplier Praxair Inc. (PX) is scheduled to report third-quarter 2014 results on Oct 29, before the market opens. The Zacks Consensus Estimate for the quarter is pegged at $1.63.
Praxair’s performance came in below expectations for the trailing four quarters, with a negative earnings surprise of 0.65%. In the second quarter, the company’s bottom line of $1.58 lagged the Zacks Consensus Estimate by 0.63%. Let us see how things are shaping up prior to this earnings announcement.
Factors Affecting Q3 Results
Industrial activities in the U.S., measured in terms of industrial production, have not been very impressive in the third quarter. A meagre year-over-year rise of 3.2% has been recorded as against a 5.5% increase in the second quarter. Also, the strengthening U.S. dollar and damp global growth are likely to hurt the country’s export businesses.
While lower industrial activities in the U.S. will hurt Praxair’s domestic revenues, unfavorable foreign trade conditions will affect the company’s international businesses. Further, the company’s international presence has exposed it to risks arising from fluctuations in foreign currency exchange rates and import and export controls. The company anticipates a 2% adverse impact from foreign currency translation in 2014.
In addition, to cover higher production costs and other expenses, Praxair hiked prices of its industrial, specialty and medical gases by 15% in the third quarter. Mounting production costs and operating expenses, if unchecked, might prove to be detrimental for Praxair’s profitability.
Earnings Whispers?
Our proven model conclusively shows that Praxair is likely to miss 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: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is currently -0.61%. This indicates lower-than-expected earnings for the stock.
Zacks Rank: Praxair currently holds a Zacks Rank #4 (Sell).
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.
Stocks to Consider
Here are some companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:
Celanese Corporation (CE), with an Earnings ESP of +1.71% and a Zacks Rank #2 (Buy).
LyondellBasell Industries NV (LYB), with an Earnings ESP of +0.48% and a Zacks Rank #2.
Ashland Inc. (ASH), with an Earnings ESP of +2.21% and a Zacks Rank #3 (Hold).
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