Industrial gas producer and supplier,
) long-term growth prospects look bright on the back of world
class technology, high quality products and rapidly growing gas
supply services worldwide. This has compelled us to maintain a
Neutral recommendation on Praxair, despite the company facing a
number of near-term headwinds.
Praxair's products are being increasingly used for various
purposes across diverse industries, including hydrogen for
refining; oxygen for healthcare; and nitrogen and carbon dioxide
for oil and gas production. Of the end markets, the company
anticipates that Manufacturing will comprise 25% of sales, Metals
17%, Energy 14%, Chemicals 11%, Healthcare 6%, Electronics 8%,
Food & Beverages 8%, Aerospace 2% and Others 9% by 2017.
Also, the company is focused on expanding its operating regions
and adding new customers to its existing sphere of businesses. In
this regard, strategic acquisitions of NuCO2 in California,
Volgograd in Russia and Dominion in Scotland in 2013 are worth
Also, a robust backlog of $2.2 billion, from 32 projects, will
work in favor of Praxair. In 2013, three major hydrogen projects
under long-term supply agreements were completed while one in
Brazil and another in Korea were signed in Jan 2014.
DOW CHEMICAL (DOW): Free Stock Analysis
METHANEX CORP (MEOH): Free Stock Analysis
NORTHERN TECH (NTIC): Free Stock Analysis
PRAXAIR INC (PX): Free Stock Analysis Report
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The operating environment is anticipated to be favorable for
Praxair in 2014, especially in the Energy, Manufacturing and
Materials industries of North America. Growth in Brazil, northern
Europe and Russia are expected to be positive while stability in
volumes is expected in southern Europe. Project start-ups are
expected in China, India and Korea. Further, the company will
continue to reward its shareholders through dividend payments and
Due to high international exposure, Praxair faces risks from
foreign currency exchange rates, import and export controls, and
other economic, political and regulatory policies of local
governments. Revenue growth in the fourth quarter 2013 was pulled
down by 2% due to an adverse foreign exchange translation impact.
Also, the company anticipates a negative impact of 3% from
foreign currency translation in 2014.
Increasing debt levels will weigh on the company's financial
burden and affect its profitability. In the fourth quarter 2013,
interest expense rose 60% year over year. Moreover, the rise in
cost of sales and services as well as operating expenses has been
a cause of concern for Praxair over time.
Other Stocks to Consider
Praxair currently has a market capitalization of $37.6 billion
and carries a Zacks Rank #4 (Sell). Some better-ranked stocks in
the industry include
Northern Technologies International Corp.
The Dow Chemical Co.
). While Methanex and Northern Technologies carry a Zacks Rank #1
(Strong Buy), The Dow Chemical holds a Zacks Rank #2 (Buy).