Praxair and NuCO2 Sign LT Contract – Analyst Blog

Praxair Inc. (PX) signed a long-term agreement with NuCO2, which is currently owned by privately held Los Angeles-based Aurora Capital Group. As per the terms of the agreement, Praxair will be supplying CO2 and high pressure cylinder gases used in beverage carbonation to NuCO2. 

 

Additionally, the company has sold some of Praxair Distribution Inc.’s retail beverage carbonation business assets in the U.S. to NuCO2. The business sold had approximately 7,500 customer locations and will escalate NuCO2’s total customer locations to 141,000 throughout the U.S. 

 

NuCO2 is the largest supplier and the only certified provider of beverage grade carbon dioxide and draught beer-grade nitrogen gas solutions in the US. The company supplies its beverage carbonation services to over 130,000 customers and 30 million consumers daily, including restaurants, convenience stores and entertainment venues. 

 

Praxair is a premier industrial gas supplier in the Americas and internationally. The company’s intense focus on expanding its reach within its operating regions while adding new customers has accelerated its profit growth, which should continue in the future. Furthermore, Praxair currently stands well positioned to benefit from the favorable economic environment, given its broad end-market exposure to food and beverage, steel, glass and chemicals. 

 

However, Praxair’s large international presence increases its vulnerability relating to fluctuations in foreign currencies and geopolitical uncertainties. In addition, volatility in energy prices further enhances its risk of energy supply in adverse economic conditions. 

 

The company expects earnings per share to be in the range of $1.15 to $1.20 for the third quarter of 2010 and between $4.60 and $4.70 for full-year 2010. Total revenue for full-year 2010 is estimated to be approximately $10.0 billion. 

 

Praxair’s chief rivals are Air Products and Chemicals Inc. (APD), Airgas Inc. (ARG), The Linde Group, Chromalloy Gas Turbine Corporation and Bodycote. We are currently maintaining a Neutral recommendation on Praxair.