In an attempt to expand its operational roots, leading industrial gas producer and supplier Praxair Inc.’s (PX) wholly-owned subsidiary Praxair Distribution, Inc., recently launched its newest store in Warwick, R.I. The newly introduced store will be primarily engaged in the supply of various types of packaged gases such as industrial and specialty gases to the clients. In addition, Praxair‘s new facility will also provide a range of safety products, hardgoods and welding equipment to the customers.
The company’s strategy of expanding its operations and adding new customers to its existing sphere of business has accelerated its profit growth. There is still a huge opportunity for Praxair to grow in future due to the increased demand for the industrial gases in several sectors. The company is estimating that the annual organic sales growth will be 8%-12% by 2015. Operating profit, driven by higher productivity and effective pricing actions is expected to be within the 10%-15% range; earnings are also likely to grow within the 12%-18% range. Moreover, the company’s earnest effort in returning values to shareholders through dividends and share buybacks is likely to boost investors’ confidence.
In its first quarter 2012, Praxair fared well reporting an EPS of $1.38, up 1.5% year over year and two cents above the Zacks Consensus Estimate. Revenue gained 5% y/y on the back of the company’s impressive performance in the North American and Asian markets.
However, the company pertains to an industry where ominous competition is prevalent. Hence, Praxair should stay cautious of big players, such as Koppers Holdings Inc. (KOP), TOR Minerals International Inc. (TORM) and Eastman Chemical Co. (EMN) who are operating in the market.
The current Zacks Consensus Estimate for the second quarter of 2012 is $1.43, representing a year-over-year increase of 3.93%. Estimates for the fiscal years 2012 and 2013 are $5.82 and $6.62, reflecting annual growth of 7.19% and 13.82%, respectively. We maintain a Neutral recommendation on Praxair. Currently, the stock carries a Zacks #3 Rank, implying a short-term (1-3 months) Hold rating.
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