Praxair Escalates Gas Prices

Praxair Inc. ( PX - Analyst Report ) together with its divisions and subsidiaries has announced escalation in gas prices in order to cover the increasing expenses of manufacturing, distribution, and raw material sourcing costs as well as for financing further investment activities.

Prices of nitrogen and oxygen have been increased up to 12% while argon and hydrogen prices have been raised to 18%. Facility fees or monthly bulk product charges and cylinder rental rates have gone up by 15% while prices for hardwoods have increased upto 15%.

The price rise, effective from June 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, the company posted upbeat first quarter 2012 results with earnings per share of $1.38 surpassing the Zacks Consensus Estimate by 2 cents. Revenue moved up 5% attributable to healthy performance in North America and Asia.

Air Products & Chemicals Inc. ( APD - Analyst Report ) , Praxair’s prime competitor, reported earnings of $1.31 per share versus $1.33 reported in the year-ago quarter. Results were below the Zacks Consensus Estimate of $1.33 per share.

Long-term prospect looks promising for Praxair with increasing application areas for industrial gases. Chemical processing, petroleum refining, metal production, fabricating, electronics and health care industries are widely using these gases. 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 second quarter stands at $1.45, representing a year-over-year increase of 4.74%. Estimates for the fiscal years 2012 and 2013 are $5.85 and $6.66, reflecting annual growth of 7.76% and 13.89%, respectively.

We currently maintain a Neutral recommendation on Praxair.