APD Air Products and Chemicals Inc

Praxair Inc. (PX) recently communicated its long-term targets while attending conferences held on June 2 and June 7.

For the long-run, the company has set a goal to achieve annual organic sales growth of 8%-12%, while it is anticipated that Emerging markets, including South America, Asia, and Mexico, would account for approximately 45% of total sales by 2015 compared with 36% in the fiscal year 2010.

Moreover, the company is experiencing high project backlog which reached about $2.5 billion at the end of the first quarter of fiscal 2011. Further, growth in the company’s backlog will enable Praxair to achieve its revenue targets.

Operating profit is likely to be within the 10%-15% range over the long run, primarily benefiting from higher productivity and effective pricing actions. Earnings per share is expected to grow within the 12%-18% range; EBITDA to be roughly 30% of total sales and capital spending approximately 15% of sales.

After-tax return on capital is expected to be over 15%, while the company aims to maintain sufficient free cash flow to pay increasing dividends and repurchase shares.

It is evident from the present scenario that the growth prospects of industrial gas producers are very bright going forward, with demand for gases expected to increase manifold due to their wide application areas. Hydrogen for refining; oxygen for healthcare; and nitrogen and carbon dioxide for oil and gas production are being increasingly used.

The demand environment for hydrogen particularly, is very strong as it is increasingly used for refining purposes. Over the period 2010-2015, refining capacity is expected to grow by 2% in US/Europe, 15% in India, 20% in China, 24% in the Middle East, and 25% in Brazil. The company has an expectation for a 20% volume growth for hydrogen per annum going forward.

Praxair is one of the leading companies engaged in the production and distribution of industrial gases. The company faces stiff competition from companies like Air Products and Chemicals Inc. (APD) and Airgas Inc. (ARG).

We currently maintain a Neutral recommendation on the stock.

 
AIR PRODS & CHE (APD): Free Stock Analysis Report
 
AIRGAS INC (ARG): Free Stock Analysis Report
 
PRAXAIR INC (PX): Free Stock Analysis Report
 
Zacks Investment Research