PX China Signs Gas Supply Contract - Analyst Blog

Praxair (China) Investment Co. Ltd, the Chinese unit of Praxair Inc. (PX) and a leading industrial gas supplier signed a nitrogen supply contract with Hong Fu Jin Precision Industry (Shenzhen) Co. Ltd, the wholly-owned subsidiary of Hon Hai Precision Industry Company Ltd.

The contract strengthens Praxair’s foothold further as a leading industrial gas supplier in the Southern Chinese region.

Hon Hai, situated in Shenzhen, Guangdong province, China, is a Fortune Global 500 company. The company provides contract manufacturing services to industries like computer, communication and consumer electronics.

Praxair is a premier industrial gas supplier both in the Americas and internationally. The company’s intense focus on expanding its reach within its operating regions while continuing to add new customers has accelerated profit growth a trend 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 risks related to fluctuations in foreign currencies and geopolitical uncertainties. Besides, volatility in energy prices enhances risks of energy supply in adverse economic conditions.

The company expects diluted 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 about $10.0 billion.

Praxair faces stiff competition from Air Products and Chemicals Inc. (APD); Airgas Inc. (ARG); Linde AG; Chromalloy Gas Turbine Corporation and Bodycote. We are currently maintaining a Neutral recommendation on Praxair, which is supported by Zacks # 3(Hold) Rank.