Praxair: Gassed Up
Imagine a company whose products are used in making everything from soft drinks to semiconductors and steel. That company is Praxair, the largest industrial-gas company in North and South America. Praxair (symbol PX) is cashing in on rising demand worldwide for such gases as hydrogen, nitrogen and even oxygen.
Praxair serves 25 mostly unrelated industries, including autos, energy, electronics, plastics, printing, and food and beverages. Business has been growing rapidly in all of the geographic regions that Praxis serves, including Asia, where the company has seen strong demand for oxygen-injection systems, which are used in steel production. Energy, electronics, metals and manufacturing have led the way in North America, which accounts for 60% of Praxair’s sales. The company has also seen steadily growing demand for hydrogen from refiners looking to meet federal-government standards for low-sulfur gasoline and diesel fuel.
Products serving oil and gas businesses were the biggest drivers of revenue growth in 2005. Sales reached $7.7 billion, up 16% from 2004. During that time, income rose 19%, to $726 million. The Danbury, Conn., company expects 2006 sales to be in the range of $8.1 to $8.4 billion. Praxis also expects oil-and-gas-related sales, which reached $260 million in 2005, to grow 25% per year over the next four or five years. Paul Raman of Zacks Equity Research says the company’s leading market position in North and South America should support long-term growth.
Praxair’s stock, recently $57, is up 21% over the past year. It trades at 21 times the $2.75 per share that analysts expect the company to earn in 2006. Raman believes the stock is worth $62.