June 22, 2009 - Praxair, Inc. (PX-NYSE) engages in the production and distribution of industrial gases primarily in North America, South America, Europe, and Asia. Its products include atmospheric gases, such as oxygen, nitrogen, argon, and rare gases; and process gases, such as carbon dioxide, helium, hydrogen, electronic gases, specialty gases, and acetylene.

Further, the company manufactures electric arc, plasma, and high-velocity oxygen fuel spray equipment, as well as arc and flame wire equipment used for the application of wear resistant coatings. It markets its products through distributors to various industries, including healthcare, petroleum refining, computer-chip manufacturing, beverage carbonation, fiber-optics, steel making, aerospace, chemicals, and water treatment. The company was founded in 1907 and is headquartered in Danbury, Connecticut.

The global economic slowdown is evident in recent numbers for Praxair. Lower volumes in every region it serves combined for a 20% decrease in sales in the first quarter. For North America and Europe, revenues were down in chemicals, metals, electronics and manufacturing markets. Those divisions represent the majority of sales for those two continents. In South America, the culprit was unfavorable currency translation that hurt revenues. Analysts see these factors as continuing throughout this year which will most likely lower earnings from 2008.

Up until the middle of last year, the stock was consistently moving higher, reaching an apex of $99.74 on June 23, 2008 (all prices reflect a 2 for 1 split in late 2003). From there, the price didn't stop going down until it hit $47.40 on November 8. Now it's back to $73, well above the low but still well below its high, as it should be since earnings are predicted to be lower this year.

But next year should show a strong bounce in earnings and revenues. The company has a take or pay contract strategy which bodes well for profitability. Also it requires upfront payments for projects. Those elements, along with solid cost cutting, should keep operating margins close to where they are now. Analysts see economic revival in 2010, especially for industrial gases. Their uses in emerging markets even now is relativley strong as infrastructure requirements continue to expand in developing nations. With a stronger local economy, currency exchange rates should turn favorable as well.

More numbers: Market Cap is $27.13 billion. Price to Book is 5.48. Operating margin for the last 12 months was 19.35% with Profit margin at 11.64%. There's $54 million in cash. Total debt is $5.05 billion. Book Value is $13.25. There are 307.47 million shares outstanding with a float of 302.56 million. Institutions own 87% of the float. The dividend is $1.60 for a yield of 2.20%.

The world runs on gas, several different kinds. Praxair makes a lot of them, many critical to building national infrastructures. There's no question of the demand for their products. The challenge comes in the price for it. With a strong backlog that only seems to be building, the stock would appear to have solid prospects. But investors have already taken note and bid the price to decent levels. If it takes a downward draft for whatever reason, it would seem to be a solid company that deserves more attention from most investors. And if global economic recovery does occur in 2010, those earnings forecasts will have to be boosted.

Company Web site: www.praxair.com

- Ted Allrich