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Analyst Blog

After May 2012, yet another gas price revision was announced by industrial gas producer and supplier, Praxair Inc. (PX - Analyst Report). The price revision will apply to all the divisions and subsidiaries of the company, effective January 1, 2013.

Prices of nitrogen, oxygen and carbon dioxide have been increased up to 15% while argon and hydrogen prices have been raised to 20%. Facility fees or monthly bulk product charges and cylinder rental rates have gone up by 15% while prices for hardwoods have escalated by 15% and helium up to 30%.

These revised prices will apply to the bulk and packaged industrial, electronics, specialty and medical gas customers in the United States, Canada and Puerto Rico. Higher raw material costs and maintenance of supply/demand balance were the prime catalysts driving this revision.

It is also worth mentioning that recently, Praxair’s prime competitor, Air Products & Chemicals Inc. (APD - Analyst Report) announced increases in specialty gas and process materials that are supplied by its Electronics business. The revised prices will be effective from January 1, 2013.

Long-term prospects look 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 fourth quarter stands at $1.38, representing a year-over-year increase of 1.76%. Estimates for years 2012 and 2013 are $5.57 and $6.18, reflecting annual growth of 2.5% and 11.1%, respectively.

We currently maintain a Neutral recommendation on Praxair. The stock also currently bears a Zacks #4 Rank, implying a short-term Sell rating.

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