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December 21, 2011
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Praxair Inc.(PX) together with its divisions and subsidiaries has announced escalation in product prices, facility fees/monthly basic charges and other items in order to cover the increasing expenses of manufacturing, distribution, and raw material sourcing costs.
Prices of nitrogen, oxygen, argon, hydrogen, carbon dioxide and helium have gone up by 15% while facility fees or monthly basic charges and cylinder rental rates soared by 15%. Prices of equipment and consumables were raised upto 10%. The price rise, effective from January 1, 2012, will be applicable to the bulk and packaged industrial, electronics, specialty and medical gas customers in the United States, Canada and Puerto Rico.
Of late, in November, the company signed multiple contracts to supply oxygen in China and Uruguay. Chinese customers included Jiangsu Oji Paper Co., Ltd. and China National Building Materials (Hefei) New Energy Co., Ltd. while the 15-year Uruguayan contract required Praxair to supply the gas to a new pulp mill complex being built in Punta Pereira, Uruguay.
Long-term prospects look promising for Praxair with increasing application areas for industrial gases. Extensive use of these gases is found in chemical processing, petroleum refining, metal production, fabricating, electronics and health care industries. By 2015, the company targets to achieve annual organic sales growth of 8%-12%; operating profit growth of 10%-15%, and earnings growth of 12%-18%.
The current Zacks Consensus Estimate for the fourth quarter is $1.37, representing a year-over-year increase of 9.31%. Estimates for the fiscal years 2011 and 2012 are $5.44 and $5.93, reflecting annual growth of 14.74% and 9.04%, respectively.
Recently, Praxair’s prime competitor Air Products & Chemicals Inc. (APD) also increased prices for liquid and bulk helium for its customers in North America. The Zacks Consensus estimates Air Products to grow earnings by 0.51% year over year to $1.36 in its first quarter of 2012. Estimates for fiscal years 2012 and 2013 stand at $5.97 and $6.72, representing annual growth of 4.27% and 12.39%, respectively.
We currently maintain a Neutral recommendation on Praxair.
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