Praxair (PX) Extends Hydrogen Supply Contract With Motiva

Industrial gas producer and supplier, Praxair Inc. PX yesterday announced the expansion of its hydrogen supply contract with Motiva Enterprises LLC. Financial terms of the deal have been kept under wraps.

Motiva Enterprises — formerly a joint venture between Saudi Refining Inc. and Shell Oil Company — started operating as a fully owned subsidiary of Saudi Refining from May 2017. It is the owner of Texas-based Port Arthur Refinery, currently recognized as the largest refinery in North America with 600,000 barrels per day of refining capacity. It currently supplies petroleum products like gasoline, diesel, aviation fuel, liquefied petroleum gas and lubricants.

Inside the Headlines

Per the long-term agreement, Praxair will be supplying more hydrogen to Motiva for meeting the additional demand created from the expansion of a hydrocracker unit and diesel hydrotreater in the Port Arthur Refinery in 2016. Moreover, the additional hydrogen supplied will assist in other operations of the refinery as well.

Demand for hydrogen in refineries has grown manifold, especially driven by the growing need for clean transportation fuels as air quality standards become strict. This industrial gas is primarily used for producing refined fuels from crude oil. It is also used as an agent in lowering the sulfur-content in diesel.

Our Take

We believe that increasing application of industrial gases in manufacturing, transportation, healthcare, food and beverages, and metal fabrication industries is an advantage for Praxair. This, along with the company’s initiatives for improving its products and services, has helped it win many contracts over time. Exiting third-quarter 2017, the company had a solid backlog of $1.5 billion.

The company currently carries a Zacks Rank #2 (Buy) and has approximately $46.4 billion market capitalization. In the last three months, shares of Praxair have yielded 15.8% return, outperforming 9% gain of the industry it belongs to.

Also, its earnings estimates for 2018 have been increased by two brokerage firms in the last 60 days. Currently, the Zacks Consensus Estimate for the year is pegged at $6.30, reflecting growth of 0.8% from the tally 60 days ago.

Praxair, Inc. Price and Consensus
 

Praxair, Inc. Price and Consensus | Praxair, Inc. Quote

Other Stocks to Consider

Other stocks worth considering in the industry are Asahi Kasei Corporation AHKSY, Methanex Corporation MEOH and Mitsubishi Chemical Holdings Corporation MTLHY. All these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Asahi Kasei’s earnings estimates for fiscal 2018 and fiscal 2019 have been revised upward in the last 60 days.

Methanex reported better-than-expected results in three of the last four quarters, with an average positive earnings surprise of 50.06%. In addition, earnings estimates for 2018 improved over the past 60 days.

Mitsubishi Chemical’s earnings estimates for fiscal 2018 and fiscal 2019 have been revised upward over the past 60 days.

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