Praxair's Growth Continues to Buck This Recession

| About: Praxair, Inc. (PX)

Back in February, I profiled a great infrastructure “pick & shovel” company. Praxair (NYSE: PX) is a global Fortune 300 company, the largest industrial gases company in the Americas, and one of the largest in the world.

Investors saw PX climb up almost 25% before pulling back. Since our recommendation, it’s up almost 10% - and we think it can run even more.

With 27,000 employees in 30 countries, Praxair produces, sells, and distributes atmospheric, process and specialty gases to a wide array of customers around the globe.

It’s also a manufacturer of high-performance surface coatings for metals. The company’s advanced manufacturing segment designs and manufactures cryogenic and non-cryogenic gas supply systems for various manufacturing processes.

In January, the company beat analysts’ earnings estimates. In April, it beat them again. In fact, it’s beaten estimates for the last 15 quarters in a row. It’s no wonder it consistently has one of the best analyst ratings in the S&P 500.

It’s one of the most profitable companies in the industrial gases sector. How does it do it? Good management, expense control, and downsizing when necessary.

Praxair’s CEO, Stephen F. Angel, is unloading 1,600 employees to shore up the balance sheet. “Demand appears to have stabilized, but at a lower level, with overall volumes down 12% versus the prior year.”

The company tightened its estimates for the full year, but only by a few percent. It’s using this slower period to make strategic acquisitions, recently acquiring Sermatech International, a global supplier of protective coatings. In the last year, Praxair has made 15 acquisitions, mostly to strengthen its distribution network.

The real growth story, however is in China and how it’s providing a significant buffer to the effects of the global recession being felt here in the United States. The company’s Chinese subsidiary - Praxair China Investment Co, Ltd. - is the largest industrial gas supplier in China with over 18 locations and 1,200 employees.

Praxair China is supplying liquid argon gas to the Nanjing Puzhen Rolling Stock Works, a subsidiary of China South Locomotive & Rolling Stock Corporation Ltd. Nanjing Puzhen is the premier state-owned manufacturer of rail cars and urban metro trains in the country with the fastest growing rail system in the world. The argon gas will be used at various welding stations in its railcar manufacturing lines.

The China rail system is the fastest growing in the world, with annual track increases of over 700 miles.

The company also announced a contract with Changhong Electric Company - one of China’s largest manufacturers of consumer electronics - to supply xenon gas mixtures used in the production of plasma display panels.

There are a number of other Chinese agreements as well, but the bottom line here is that Praxair continues to buck the recession with good old fashioned growth in what is turning out to be the largest market in the world for its products.

On July 29th, the company will announce earnings for its second fiscal quarter. Given its amazing track record, and an increasing growth story in China, there’s a good chance it will beat estimates again.

Farther out on the horizon, the economic stimulus plan will spur many industrial and construction projects in the second half of 2009 and 2010, further increasing the demand for the company’s products.

If you’re looking for a great company in the industrial materials sector, you need look no further than Praxair.

Disclosure: None