Analysis: Praxair Stock Could Still Gain Another 18%

Industrial gas supplier Praxair, Inc. PX could be a beneficiary of an improvement in economic fundamentals.

The Analyst

Argus analyst Bill Selesky upgraded shares of Praxair from Hold to Buy and set a price target of $171, which represents 18 percent appreciation from current prices, including the current yield.

The Thesis

Praxair is well-positioned to deliver stronger earnings per share, based on its mix of high-growth businesses, capitalizing on the improvement in global economic activity, Argus said in a Monday note.

The company's businesses generated above-industry average margins, earnings and return on invested capital, the firm added.

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The previous two quarters' results exceeded expectations, Selesky noted. Additionally, the strategic merger with Linde AG is a significant positive, giving it a greater scale and geographical reach, while also providing opportunity for more reliable and consistent earnings growth over the coming years.

"In all, we expect Praxair to perform above its peers over the coming months, as it heads into the merger in 2H18," Selesky said.

As such, Argus raised its 2017 earnings per share estimate for Praxair from $5.69 to $5.81, reflecting the company's revised guidance. This compares to the consensus estimate of $5.78. The firm also upwardly revised its 2017 earnings per share estimate from $6.19 to $6.31, compared to the consensus estimate of $6.35.

The Price Action

At time of writing, shares of Praxair were down 0.4 percent at $147.71.

Praxair shares have been up 25.33 percent in the year-to-period, outperforming the 15.34 percent gain of the S&P 500 Index.