Praxair (PX): Numerous Themes and Catalysts -Jefferies

Jefferies analyst, Laurence Alexander believes Praxair (NYSE: PX) should benefit from 6 industrial gas themes and 5 near term trends.

Six Industrial Gas Themes: 1/ Structural improvement (discipline, restructuring, consolidation); 2/ Real pricing (cylinders, esp. as mining capex stabilizes, NA merchant) should lift ROIC to the extent these channels outpace on-site additions; 3/ Excess H2 at SMRs creates a "reliability arbitrage" into higher-value (non-fuel) applications; 4/ Cyclical turn in Energy and a Brazil reset (less corruption, more middle class growth); 5/ US packaged gas M&A (~15 regional players left >$50m, Praxair prefers <7x, or <11x pre-synergies); and 6/ "Large" projects are getting larger ($400m is the new $100m, and >$1bn is in sight), but take on more cyclical risk.

Five Near-term Trends: 1/ 25%-35% of the portfolio should remain positive (aerospace, food & beverage, electronics); 2/ Chemicals should have step-up growth from new on-sites in 2017-2018; 3/ US metals should improve QoQ; 4/ Energy remains bifurcated between strength in refining and upstream applications troughing; 5/ US packaged likely stays challenged until manufacturing restock and $ normalization dynamics kick in (1H17?).

No change to Buy rating or $135 PT.

For an analyst ratings summary and ratings history on Praxair Inc. click here. For more ratings news on Praxair Inc. click here.

Shares of Praxair Inc. closed at $112.45 yesterday.

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