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Praxair Stock Is Smoking on 1Q18 Earnings and Revenue Beat

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Praxair’s 1Q18 revenue

Praxair (PX), the top industrial gas company, reported revenues of ~$3.0 billion for 1Q18 today, reflecting growth of 9.9% over 1Q17. The company beat Wall Street analysts’ estimates of ~2.93 billion. Higher volumes, price improvement, and favorable foreign currency fueled Praxair’s revenue growth. Praxair’s revenue grew across all of its reporting segments, led by Asia at 21%, Europe at 20%, North America at 7%, and Surface Technologies at 11%, while South America declined 1%, inclusive of currency impact.

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1Q18 adjusted EPS

Praxair reported adjusted earnings per share of $1.65, reflecting growth of 20.4% on a year-over-year basis. In 1Q17, PX reported adjusted EPS of $1.37. The adjusted EPS excluded a charge of $0.06 per share related to a transaction cost for the potential Linde merger. The earnings per share growth was fueled by higher sales and better operating costs. Praxair’s cost of goods sold as a percentage of sales was 90 basis points better on a year-over-year basis. Also, selling, general, and administrative expenses improved by 30 basis points.

Guidance and stock price

Praxair issued EPS guidance for the next quarter in the range of $1.65–$1.72, growth of 14%–18% year-over-year. This growth doesn’t include the transaction cost related to the potential merger with Linde. However, the guidance includes the expected benefit of $0.05 from US tax reforms. PX’s tax rate should be in the range of 23%–25%. Praxair’s stock price gained ~2.0% and was trading at $152.66.

Investors can indirectly access Praxair by investing in the Materials Select Sector SPDR Fund (XLB), which has invested 6.8% of its portfolio in Praxair. The fund also provides exposure to DowDuPont (DWDP), Monsanto (MON), and Air Products and Chemicals (APD) with weights of 21.7%, 8.7%, and 5.6%, respectively, as of yesterday.

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