Specialty coatings and paints giant
) is scheduled to report its second-quarter 2012 results before the
trading begins on Thursday, July 19. The current Zacks Consensus
Estimates for revenues and earnings for the quarter are $4,162
million and $2.37 per share, respectively.
DU PONT (EI) DE (DD): Free Stock Analysis
PPG INDS INC (PPG): Free Stock Analysis Report
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PPG Industries expects domestic growth in the second quarter to be
similar to the first quarter and expects accelerated growth in the
emerging markets, buoyed by increased industrial activity in China.
However, it continues to see sluggish demand in the European
With respect to earnings surprises, PPG Industries beat the Zacks
Consensus Estimates in the trailing four quarters and we expect
this trend to continue into the second quarter. The company has
delivered an average positive earnings surprise of 2.3% over the
past four quarters, implying that it has beaten the Zacks Consensus
Estimate by that measure.
First Quarter Flashback
PPG Industries continued its positive surprise streak in
first-quarter 2012 with adjusted earnings of $1.81 a share beating
the Zacks Consensus Estimate by a couple of cents. Revenues rose 6%
year over year to $3,752 million, also beating the Zacks Consensus
Estimate of $3,696 million.
PPG Industries saw growth in each of its coatings businesses in the
quarter. The company's results were aided by strong domestic demand
and growth across emerging markets, offset by weakness in Europe.
Estimate Revisions Trend
Estimates for the June quarter saw limited movement over the past
week with just 1 analyst (out of 14) having raised his/her forecast
without any reverse movement. Estimates have leaned towards the
negative side over the past 30 days with 3 analysts having lowered
their forecasts with one moving in the opposite direction.
For 2012, estimates reflect a bearish sentiment with 4 analysts
(out of 16) having pruned their estimates over the last 30 days
with no upward movement. Over the past 7 days, 1 analyst has
lowered his/her forecast with none raising the same.
The consensus estimate for the second quarter remained static over
the past month while increasing by a penny over the past week. For
2012, the consensus estimate declined by 1 cent over the last 30
days while remaining stationary over the last 7 days. The current
Zacks Consensus Estimate for fiscal 2012 is $7.97, representing an
estimated year-over-year growth of 17.3%.
PPG Industries' Performance Coatings and Specialty products
businesses have delivered healthy growth over the past few quarters
and we expect this trend to continue in the second quarter. Better
pricing and lower costs of natural gas are also expected to support
PPG Industries has a strong cash position, and continues to utilize
cash on earnings growth initiatives. Moreover, the company has been
returning cash to its shareholders in the form of uninterrupted
dividend payouts. It has also initiated restructuring measures,
especially in its European operation, which is expected to fetch
cost savings in the back half of 2012.
PPG Industries' strategy of diversifying its business across
various products and geographies has come in handy in testing
times. However, raw material costs have been a matter of concern
for the company's earnings. Although raw material costs have shown
a moderating trend, the price of the company's primary raw material
TiO2 has been escalating.
Currently, we have a long-term Outperform recommendation on PPG
Industries. The company, which competes with
EI DuPont de Nemours & Co.
), retains a Zacks #3 Rank, which translates into a short-term (1
to 3 months) Hold rating.