Citigroup downgrades Air Products, Praxair

24 September 2008 15:17  [Source: ICIS news]

TORONTO (ICIS news)--Citigroup has downgraded its ratings for US industrial gases majors Air Products and Praxair, prompted by Air Products' profit warning this week and fears over weak US and European economies, it said on Wednesday.

 

The analysts downgraded both stocks to “hold”, from “buy” and also cut their target prices and earnings per share (EPS).

 

“The slowdown is just beginning, with Air Products as the unusual first victim of the softening economy,” said Citigroup.

 

“And despite the stock price selling off over the last few weeks, we don't foresee much upside in the near term,” it added.

 

About half of Air Products' reduction in its EPS guidance was to due to company-specific issues, Citigroup said.

 

However, slowing in Europe, weakening electronics as well as steel production cutbacks were most worrisome for the industry, the analysts said and added: “Weakness related to these factors may last a few quarters.”

 

Praxair, for its part, remained a well managed company with strong focus on returns, they said.

 

But in light of slower economies in the US and Europe, Praxair’s valuation no longer justified a compelling “buy” rating.

 

Citigroup’s target price for Air Products was now $81, down from $118, its EPS estimates for 2008 was $4.96, down from $5.08, and for 2009 it was $5.25, down from $5.90.

 

For Praxair, Citigroup’s new target price was $87, down from $104, its 2008 EPS estimate iwa $4.19, down from $4.28, and its 2009 EPS estimate was $4.85, down from $5.25, it said.

 

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By: Stefan Baumgarten
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