Industrial gas producer and supplier, Praxair Inc. (PX) embarks on anotherimportant business venture of expanding its operations in the southeast region of the United States; and has joined hands with another major player in the industrial gas industry, nexAir LLC for the purpose.
A Memphis-based company, nexAir is one of the largest suppliers of high-quality industrial, specialty, medical, and bulk gases, dry ice, welding equipment, welding supplies, and medical equipment. The company also owns large ISO-certified cylinder gas plants in the United States. Its operations are carried across 9 states with 26 locations.
The joint venture between the two parties entails carrying on operations in Praxair’s 8 gas distribution facilities in Georgia, Alabama and Tennessee. The combined business, expected to generate about $150 million in revenues, will be one of its kind to heighten business prospects for both the companies in the Southeast United States. Praxair will be an equity stake holder in the venture.
We believe such ties-ups will help Praxair achieve its long-term target of annual organic sales growth of 8%-12% by 2015. Growing popularity of Praxair’s technologically advanced work has led to around $2.5 billion in backlogs for the company. In addition, strategic acquisitions as that of Canadian Cylinder & Gases Inc. and five operating units of Airgas Inc. bode well for the company.
The current Zacks Consensus Estimate for the third quarter of 2012 is $1.40, representing a year-over-year decrease of 0.26%. Estimates for the fiscal years 2012 and 2013 are $5.64 and $6.37, reflecting annual growth of 3.88% and 12.96%, respectively.
We maintain a Neutral recommendation on Praxair. The stock also carries a Zacks #4 Rank, implying a short-term (1-3 months) Sell rating.
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