Praxair Inc. (PX) has signed an agreement with Valero Energy Corp. (VLO) for the supply of oxygen and nitrogen to Valero’s Memphis, Tenn., refinery connected to Praxair’s pipeline system. According to the agreement, Praxair will build a new air separation plant with a capacity of 450 tons per day together with two new six-mile pipelines for the supply of oxygen and nitrogen to Valero’s Memphis refinery.
Praxair’s focus on intensifying its reach in the regions where it operates and adding new customers to its existing spheres of business has accelerated its profit growth, which is going to continue in future. Furthermore, the company is likely to benefit from the general favorable economic environment, given its broad end-market exposure to food and beverage, steel, glass and chemicals.
Praxair is the largest industrial gas company in North and South America and one of the largest worldwide. However, low natural gas prices hurt the company’s top- and bottom-line results in the third quarter of 2009, which is likely to continue for the next couple of quarters.
Nevertheless, the auto, steel and chemical industries have announced a significant number of plant start-ups in the second half. Moreover, going forward, Praxair management expects its pipeline of new business to remain strong.
For the fourth quarter, Praxair expects earnings per share in the range of $1.05 to $1.10. For the full year, the company expects sales to be about $9 billion and adjusted earnings per share in the range of $3.96 to $4.01. Full-year capital expenditures are expected to be $1.4 billion. Thus, Praxair will be in a better position in the medium term. Therefore, we maintain our Outperform rating on the stock.
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