APD Air Products and Chemicals Inc

The leading industrial gas supplier, Praxair Inc's (PX) subsidiary, Praxair Distribution Inc. recently announced the acquisition of American Gas Group (AGG). Financial terms of the transaction were not disclosed.

The acquired company, having annual sales of $28 million, is one of the leading specialty gases suppliers in the world. The company employing over 56 people, comprises Specialty Gases of America, Inc., American Specialty Gases Inc., Semiconductor Resources, Inc. and Specialty Gases of America, LLC.

American Gas Group packages an array of specialty gases including EPA Protocols, hydrocarbons, VOC mixtures, reactive mixtures, high-purity chemicals and research-grade gases, in addition to industrial and medical gas products. The acquisition thus adds value to Praxair’s Midwest specialty gas production capabilities.

It is evident from the present scenario that the growth prospects of industrial gas producers are very bright going forward, with demand for gases ever on the rise due to their wide application areas. Praxair aims to achieve annual organic sales growth in the range of 8%-12%, with emerging markets, including South America, Asia, and Mexico, accounting for an estimated target of 45% of total sales by 2015.

In the third quarter 2011, Praxair reported adjusted earnings per share (EPS) of $1.40. The results surpassed the Zacks Consensus Estimate by a penny and rose 16% year over year. Total revenue in the quarter was $2,896 million, up 14.1% year over year and comprehensively beat the Zacks Consensus Estimate of $2,838 million.

The current Zacks Consensus Estimate for the third quarter is $1.36, representing a year-over-year increase of 9.14%. Estimates for the fiscal years 2011 and 2012 are $5.43 and $6.01, reflecting annual growth of 14.64% and 10.66%, respectively.

The company faces stiff competition from its rivals like Air Products and Chemicals Inc. (APD) and Airgas Inc. (ARG). We currently maintain a Neutral recommendation on Praxair.

 
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