Praxair, Inc. (NYSE:PX)

CAPS Rating: 5 out of 5

The Company is the industrial gases supplier in North and South America, is rapidly growing in Asia, and has strong, well-established businesses in Europe.

Recs

3
Player Avatar mookimd (54.80) Submitted: 3/22/2010 1:30:54 PM : Outperform Start Price: $75.16 PX Score: +2.95


Strengths and Growth Prospects
-Praxair Inc. is the largest industrial gases supplier in the world, supplying primarily atmospheric gases and related services to a multitude of end markets.
-On-site tonnage comes with 10-20 year contracts set in place, which provides a reliable revenue stream
-Praxair serves over 25 different end markets in various regions, with over 50% of their revenues from sources outside the U.S.
-Gross margins holding at 40% over last 10 years
-Return on assets rising over 10 year period from
-Strong backlog and pricing power
-High barriers of entry due to the importance of uniformity and reliability
-Lowering overhead costs to (partially) offset economic slowdown
-Diversified customers (e.g. industrial gases used in energy, electronics, chemicals, metals, manufacturing, healthcare, aerospace and food & beverage)
-Strategic acquisitions boosting earnings
-42 on-site production plants under construction (as of February 2009)
-Operational efficiency caters to consumers’ demands
-Dividend yield of 2% with 5-year dividend growth rate of 26%
-PEG of 1.7 (compared to S&P 500 of 2)
-New projects in South America, China, India and Korea
-Acquired 15 packaged gases distributors in the U.S. and Canada. Scale matters a lot in the industrial gases industry and organic growth is not always the optimal strategy.
-International exposure capable of driving strong growth in the future
-Lion’s share of patents relating to technology for carbon capture and sequestration (CCS)
-Praxair was one of only 12 companies that made the cut to participate in the government's $1.4 billion CCS race.

Weaknesses and Potential Challenges
-Possibly over-valued: P/E and P/B high (even though in line with historical valuation)
-Profitability will struggle as long as economic woes persist
-High debt with a long-term debt/equity ratio

Featured Broker Partners


Advertisement