Praxair Rejects CADE Allegations - Analyst Blog

Praxair Inc.’s (PX) Brazilian subsidiary, White Martins was fined R$2.2 billion (US$1.3 billion) by the Brazilian Administrative Council for Economic Defense (CADE) for its alleged anticompetitive activity in Brazil. Apart from Praxair, the council imposed fines on four other industrial gas companies in Brazil .

Reaction of disbelief followed after the fines were imposed and Praxair and White Martins both rejected the charges, asserting that these allegations are baseless and without any evidence.

Praxair is one of the leading companies engaged in the production and distribution of industrial gases, essentially catering to demands in North America, South America, Europe, and Asia. The company seems to have overcome the recessionary impact and now stands well positioned to leverage from the growing requirement from almost all geographical regions. End markets, especially chemical, electronic and metal are expected to boost demand.

Praxair has an extensive pipeline of projects with roughly 10 new projects scheduled to be started in the second half of 2010. The project backlog that is incessantly growing is likely to reach roughly $2.5 billion in 2010 compared with $2.0 billion in 2009.

For the third quarter of fiscal 2010, management provided its EPS guidance range of roughly $1.15 – $1.20. The company reiterated its full year EPS guidance of $4.60 – $4.70, revenue expectation of approximately $10 billion, capital expenditure target of $1.4 billion and tax rate of about 28%.

However, Praxair’s large international presence gives rise to risks related to fluctuations in foreign currencies and geopolitical uncertainties, while volatility in energy prices also jeopardizes energy supply in adverse economic conditions. The company faces stiff competition from Air Products and Chemicals Inc. (APD); Airgas Inc. (ARG); Linde AG; Bodycote and Chromalloy Gas Turbine Corporation.

We currently maintain our Zacks #3 (Hold) Rank and long-term Neutral recommendation on the stock.