Industrial gas producer and supplier, Praxair Inc. (PX - Free Report) recently announced that it has entered into a long-term agreement for supplying oxygen to Fibria Celulose S/A (FBR - Free Report) , world’s leading producer of eucalyptus pulp. Financial terms of the deal have been kept under wraps.
As revealed, Praxair secured the contract through its Brazilian subsidiary, White Martins. It will be building and operating a new plant that will supply oxygen to support Fibria Celulose’s Três Lagoas facility in Brazil. Praxair anticipates the plant to start production in late 2017.
The supply contract will enable Praxair to meet Fibria Celulose’s growing demand for oxygen for expansion of eucalyptus pulp production capacity at Três Lagoas facility, from 5.3 million tons to 7.25 million tons annually.
We believe such contracts reflect customers’ preference for Praxair’s products and will prove beneficial for its growth, going forward. The company had a solid backlog of $1.3 billion at the end of second-quarter 2016. Also, increasing applications of industrial gases in manufacturing, transportation, healthcare, food and beverages, and metal fabrication industries will act as growth boosters for industrial gas producers like Praxair.
Despite such bright prospects, we believe that exposure to near-term headwinds will weigh on its performance in the quarters ahead. The stock currently carries a Zacks Rank #4 (Sell) and has a market capitalization of $34.5 billion.
Stocks to Consider
A couple of better-ranked stocks in the chemical industry include Innophos Holdings Inc. (IPHS - Free Report) and Mitsubishi Chemical Holdings Corporation (MTLHY - Free Report) . Both the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Innophos Holdings reported better-than-expected results in the last two quarters as well as witnessed upward earnings estimate revisions for 2016 over the past 60 days.
Mitsubishi Chemical Holdings has witnessed positive revisions in earnings estimates for fiscal 2017 and 2018 over the past 60 days.
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