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Praxair Joins with Midrex

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Leading industrial gas supplier Praxair Inc. (PX - Free Report) recently announced its integration with Midrex Technologies Inc., a leading manufacturer of direct reduced iron (DRI) technology. The deal was highly consistent with Praxair’s strategy of enlarging its client base and services in the industry.

Under the alliance, Praxair and Midrex will be jointly engaged in supporting the production system of direct reduced iron (DRI) through the latest technological system. The newly introduced process is specifically designed with innovative partial oxidation technology to help transforming hydrocarbon fuels into improved quality, increased temperature syngas, which will be used for manufacturing DRI in the regions where natural gas is unavailable.  

In its first quarter 2012, Praxair fared well, reporting an EPS of $1.38, up 1.5% year over year -- two cents above the Zacks Consensus Estimate. Revenue gained 5% y/y on the back of the company’s impressive performance in North American and Asian markets.

There is a huge opportunity for the company to grow in the future due to the increased demand for the industrial gases in several sectors. Praxair is estimating that the annual organic sales growth will be 8%-12% by 2015.

However, the company pertains to an industry where strong competition is prevalent. Hence, Praxair must stay cautious of big players such as Koppers Holdings Inc. (KOP - Free Report) , TOR Minerals International Inc. and Aceto Corp. .

The current Zacks Consensus Estimate for the second quarter of 2012 is $1.44, representing a year-over-year increase of 4.23%. Estimates for fiscal years 2012 and 2013 are $5.83 and $6.64, reflecting annual growth of 7.39% and 13.82%, respectively.

We maintain a Neutral recommendation on Praxair. Currently, the stock carries a Zacks #3 Rank, implying a short-term (1-3 months) Hold rating.

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