Industrial gas producer, Praxair Inc. (PX) announced certain income tax settlements with the Spanish Government, adjusting the charges with fourth quarter 2010 earnings. The charges will lower the company’s fourth quarter net earnings by roughly $290 million, or 93 cents per share.
The settlement of income tax disputes will result in a $250 million charge to fourth quarter earnings and a cash payment of $500 million. In addition, Praxair’s fourth quarter results will also be adjusted with $40 million related to the expenses for selling the U.S. homecare portion of the North American healthcare business.
Praxair reiterated its adjusted earnings per share guidance at $1.18-$1.23. Excluding the above-mentioned charge of 93 cents, fourth quarter GAAP earnings are expected to in the range of 25-30 cents per share.
Praxair is one of the leading industrial gas producers, operating primarily in North America, South America, Europe and Asia. We believe Praxair has significant growth opportunities in diverse markets and its concerted effort to increase exposure and tap opportunities in emerging markets is also very encouraging.
In our opinion, the growth prospects of industrial gas producers are very bright going forward, with ever rising demand for gases due to their wide application areas. Industrial gases are being increasingly used by the chemical processing and petroleum refining, metal production and fabricating, and electronics and health care industries.
As the economy emerges from the recent global crisis, requirement for industrial gases is expected to grow. Moreover, the company has an extensive pipeline of projects with backlog expected to be on the rise.
We believe Praxair is well positioned to deliver another good quarter, beating estimates, despite stiff competition from its peers like Air Products & Chemicals Inc. (APD). We currently maintain an Outperform recommendation on the stock.
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