Industrial gas producer and supplier Praxair Inc. (PX) recently signed its second long-term hydrogen supply contract for Nov 2014. These contracts wins indicate the growing applications of hydrogen as well as customers’ preference for Praxair’s products.
Praxair has agreed to supply hydrogen to Repsol, a globally renowed petrochemicals producer. Financial terms of the contract have not been disclosed.
Per the contract, the company will construct a new steam methane reformer (SMR) at La Pampilla Refinery of Repsol. The plant, using natural gas or naphtha, will have a daily production capacity of nearly 12 million standard cubic feet of hydrogen. Commercial start-up of the plant is expected in 2016.
Prior to this, Praxair won a long-term hydrogen supply contract from Plug Power Inc. (PLUG). The contract requires the company to supply liquid hydrogen to Plug Power customers in the U.S., particularly those using the latter’s GenFuel hydrogen fueling infrastructure solution.
We believe industries like manufacturing, transportation, healthcare, food and beverages, and metal fabrication, among others, are on the rise. This in turn, will act as demand stimulators for the industrial gases industry. Hydrogen is being increasingly used in the refining industry while oxygen has found use in healthcare, and nitrogen and carbon dioxide in oil and gas production. Increased applications of industrial gases are a boon for industrial gas companies like Praxair.
The Zacks Consensus Estimate for Praxair is pegged at $6.27 for 2014, representing year-over-year growth of 5.7%. Earnings, over the next five years, are expected to grow by 11.7%.
With a market capitalization of $36.8 billion, Praxair currently carries a Zacks Rank #3 (Hold). Two better-ranked stocks in the industry are Trecora Resources (TREC) and Valhi, Inc. (VHI), both carrying a Zacks Rank #2 (Buy).
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