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Praxair Inc. (NYSE:PX) is slated to release its third quarter 2011 results on Wednesday, October 26. The current Zacks Consensus Estimate for the third quarter earnings per share (EPS) is $1.39, representing an annualized growth of 14.96%.

Praxair had outperformed the Zacks Consensus Estimate over the trailing four quarters. The average earnings surprise was a positive 1.19%, implying that the company has outdone the Zacks Consensus Estimate by the same magnitude over the last four quarters.

Second Quarter Highlights

Praxair’s second quarter results were impressive with earnings per share of $1.38, surpassing the Zacks Consensus Estimate by a cent and registering a year-over-year increase of 16%. The results were in line with the higher end of management’s guidance range of $1.33-$1.38.

Total revenue jumped 13.1% to $2,858 million, above the Zacks Consensus Estimate of $2,793 million. Increased revenue was driven by an enhanced volume, as sales boosted in all geographical operating areas mainly in manufacturing, metals and chemicals. Project backlog at the end of the quarter was $2.7 billion.

Agreement/Magnitude of Estimate Revisions

In the last 30 days, out of about 20 analysts providing earnings per share estimates on Praxair, one firm increased it for the third quarter 2011 and another for the fiscal year 2012. There were some cautious firms who lowered their estimates. There was one downward revision for the third quarter; four for both the fiscal years 2011 and 2012.

Despite the revision, estimate for the third quarter 2011 remained stable at $1.39, while that for the fiscal year 2011 slipped by 2 cents to $5.46. Fiscal year 2012 earnings average estimate fell by 11 cents to $6.13 per share.

The current estimates represented year-over-year growth of 14.96% for the third quarter, 15.15% for the fiscal year 2011 and 12.34% for 2012.

Our Take

We believe the growth prospects of industrial gas producers are very bright going forward, with demand for gases expected to increase manifold due to their wide application areas.

Despite a bleak near-term economic outlook and lower estimate revisions by analysts, we believe the company is all set to post good third quarter results. Management's earnings guidance range for the quarter stands at $1.35-$1.40 per share with Zacks Estimate nearing the high-end of the range.

The company is experiencing a high project backlog which reached about $2.7 billion at the end of the second quarter of fiscal 2011. Long-term contracts include the ones with Valero to supply gases in Texas and Louisiana as well as contract with Motiva. These contracts will start generating revenues by 2012 or 2013.

Praxair’s nearest competitor Air Products & Chemicals Inc. (NYSE:APD) recently reported its fourth quarter results with earnings per share of $1.51, above the year-earlier earnings of $1.35 and in line with the Zacks Estimate of $1.51. Banking on its strong project backlog, the company looks forward to meeting its 2015 financial goals.

For Praxair, we currently maintain a Neutral recommendation.

Source: Praxair: Earnings Preview