Praxair (PX) has a Zacks #2 Rank. Its stock trades at 18.6x 2010 consensus EPS estimates and 16.5x 2011 consensus EPS estimates.
Growth and Income
Analysts estimate that Praxair will grow its earnings per share 15.8% in 2010 and 12.6% in 2011. The stock also offers investors a decent dividend yield of 2.1%.
Company Description
Praxair produces and distributes industrial gases such as oxygen, nitrogen, carbon dioxide, hydrogen, and acetylene. It is the largest industrial gas supplier in North America, where the company derives nearly 60% of its revenue.
Business Strategy
Praxair is focused on growth areas, including hydrogen for higher fuel standards, processing heavy sour crude oil, coal gasification, and water treatment, as well as international expansion. As Praxair lands more of these types of contracts, its revenue growth will follow.
Praxair is also focused on controlling costs, which is leading to higher profit margins. In the fourth quarter, Praxair had an operating margin of 21.3%, up from 20.4% in the fourth quarter 2008 and 21.0% in the third quarter 2009. The company should be able to maintain its cost savings even after its revenue growth resumes, leading to faster earnings growth.
Estimates Inching Higher
Praxair is scheduled to report first-quarter results on April 28, so it isn’t too surprising to see analysts not making any major changes to their earnings estimates.
That said, in the last seven days, there have been three estimates revised upward and one downward revision. In the last 30 days, the Zacks Consensus Estimates for 2010 and 2011 are each up a penny.
Industry Leader
Praxair’s trailing twelve-month return on equity is 24.5%, above the industry average of 14.6%. Its net profit margin is 14%, well above the industry’s 7.8% average.
The Chart
Praxair shares fell more than 7% during the market’s February sell-off. However, the stock has rebounded nicely and now trades about $2 shy of its 52-week high of $88.
