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Praxair’s 4Q17 Revenue Expectations: The Driving Factors

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Jan. 18 2018, Published 10:01 a.m. ET

Praxair’s 4Q17 revenue expectations

As of January 15, 2018, analysts are expecting Praxair (PX) to post revenue of $2.8 billion for 4Q17, a 6.8% rise on a year-over-year basis. In 4Q16, Praxair reported revenue of $2.6 billion. If it manages to meet revenue expectations, it could bring the company close to $3 billion in revenue. The last time Praxair achieved that was in 4Q14.

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Driving factors

Praxair’s projected revenue growth in 4Q17 is expected to be driven by growth primarily in the European and Asian regions. These two regions have continued to grow throughout 2017. In 3Q17, Asian revenue rose 15% due to higher growth in China, Korea, and India. Europe grew by 11%. North America, which has more than a 50% share of Praxair, rose 4%. These trends are expected to continue in 4Q17. The other important influencing factor for Praxair’s revenue growth could be the higher price attainments in North America, Europe, and Asia.

The continued weakness in the dollar could also help drive revenue growth. In 4Q17, the dollar index, which measures the dollar movement against the basket of currencies, declined 1%. In 2017, the dollar index fell 9.9%.

Outlook

At the end of 3Q17, Praxair had an order backlog of $1.5 billion. Growth in the order backlog could indicate growth in new contracts. Once a new contract is signed, it takes some time for the project to be implemented. Praxair also hiked the prices of helium and other gases. However, the benefit of the price increases, effective January 1, 2018, will be more visible in 1Q18.

Investors can indirectly hold Praxair by investing in the iShares US Basic Materials ETF (IYM), which has invested 6.5% of its portfolio in Praxair. The fund also provides exposure to Monsanto (MON), LyondellBasell (LYB), and Air Products & Chemicals (APD), with weights of 7.2%, 5.2%, and 5.1%, respectively, as of January 15, 2018.

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