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Praxair's Exposure to Headwinds Dims Growth Opportunities


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We issued an updated research report on industrial gas producer and supplier, Praxair Inc. (PX - Analyst Report) on Oct 3, 2016. The company is known for its industrial gases and related services worldwide.

Praxair Inc., with a $34.6 billion market capitalization, is facing severe headwinds that are restricting its growth. The discussion below will justify the company’s Zacks Rank #4 (Sell).

We believe Praxair’s international exposure has raised concerns given the unfavorable movements in foreign currencies as well as adverse import and export controls and uncertain economic conditions in the foreign nations it serves. The company has operations in many regions, including North America, South America, Europe and Asia.

In addition, Praxair is exposed to risks arising from high production costs, stiff competition, and extreme dependence on energy. In addition, the company faces risks from geopolitical issues in foreign end markets. These uncertainties can adversely impact the company’s growth in the near term. Also, it is a highly leveraged company with a long-term debt balance of approximately $9.2 billion at the end of second-quarter 2016. If unchecked, higher debt levels might increase Praxair's financial obligations and prove to be detrimental for its profitability.

For 2016, Praxair revised its earnings guidance to $5.45–$5.60 per share range versus $5.35–$5.70 expected earlier, keeping its mid-point constant. The company predicts adverse foreign currency movements to negatively impact earnings by 3%. Over the last 60 days, the Zacks Consensus Estimate on Praxair has decreased for 2017, but remained stable for 2016.

We believe these headwinds more-than-offset the positive impacts from Praxair’s diversified product portfolio, large client base and organic and inorganic growth initiatives.


Some better-ranked stocks in the chemical industry include The Chemours Company (CC - Snapshot Report) , Innophos Holdings Inc (IPHS - Snapshot Report) and Olin Corporation (OLN - Snapshot Report) . All these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Chemours Company has a positive average earnings surprise of 144.74% for the last four quarters. Also, earnings expectations for 2016 and 2017 have improved over the past 60 days.

Innophos Holdings Inc’s financial performance has been impressive in the last quarter, with a positive earnings surprise of 22%. Also, earnings estimate for 2016 have been revised upward over the last 60 days.

Olin Corporation has witnessed positive revisions in earnings estimates for 2016 and 2017 over the past 60 days.

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