Zacks Investment Research downgraded Praxair Inc. PX to a Zacks Rank #5 (Strong Sell) on Jun 27, 2015. Going by the Zacks model, companies holding a Zacks Rank #5 have strong chances of performing worse than the broader market.
Why the Downgrade?
Market sentiments have been weak for Praxair since the beginning of 2015, with the stock having lost 5.1% in value till date. Also, first-quarter 2015 results as well as the outlook for 2015 failed to create the much-needed optimism among investors.
For 2015, Praxair has lowered its earnings projection to $5.90−$6.15 per share from $6.15−$6.50 predicted earlier. Sales are anticipated within $11.4−$11.7 billion, down compared with the previous projection of $12−$12.4 billion. The revised guidance takes into account a negative impact of 10% from foreign currency translation as compared with 2014.
In addition, Praxair remains exposed to risks arising from high production costs, stiff competition and extreme dependence on energy. Huge debt levels worth $8.8 billion, if left unchecked, will inflate the company’s financial obligations, subsequently denting its profitability growth.
We believe resentment over these headwinds triggered the downward revision in earnings estimates for Praxair. Over the last 60 days, the Zacks Consensus Estimate for the stock has fallen 4.5% to $6.01 per share for 2015 and 4.9% to $6.66 for 2016.
Stocks to Consider
Praxair currently has a market capitalization of $35.1 million. Better-ranked stocks in the chemical diversified industry include LyondellBasell Industries N.V. LYB, Stepan Company SCL and Trecora Resources TREC, all sporting a Zacks Rank #1 (Strong Buy).
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