Specialty coatings and paints giant
) is slated to report its third-quarter 2012 results before the
trading begins on Thursday, October 18. The current Zacks Consensus
Estimates for revenues and earnings for the quarter are $3,904
million and $2.21 per share, respectively.
DU PONT (EI) DE (DD): Free Stock Analysis
PPG INDS INC (PPG): Free Stock Analysis Report
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The Pennsylvania-based company, in its second quarter earnings
call, sated that it expects the European market to remain under
pressure in the second half of 2012. The company expects higher
input costs to continue to weigh on its results. But it has adopted
appropriate pricing strategy to offset the impact.
With respect to earnings surprises, PPG Industries beat the Zacks
Consensus Estimates in three of the trailing four quarters while it
reported in line in one occasion. The company has delivered an
average positive earnings surprise of 1.4% over the past four
quarters, implying that it has beaten the Zacks Consensus Estimate
by that measure.
Second Quarter Flashback
PPG Industries racked up record earnings in second-quarter 2012
despite lower sales. It logged adjusted earnings of $2.36 a share,
matching the Zacks Consensus Estimate.
Revenues, however, fell 0.8% year over year to $3,955 million,
missing the Zacks Consensus Estimate of $4,153 million. Unfavorable
currency exchange translation weighed on the top line in the
PPG Industries saw mixed results across its end markets in the
quarter with its aerospace and automotive OEM coatings businesses
recording healthy growth. Strong internal growth in domestic market
was somewhat offset by weakness in Europe.
Estimate Revisions Trend
Estimate for the September quarter has barely moved over the past
week with just 1 analyst (out of 16) having lowered his/her
forecast without any reverse movement. There were two upward
revisions over the past 30 days accompanied by a couple of
movements in the opposite direction. A similar trend applies to the
estimate for 2012.
Given the lack of activity, the Zacks Consensus Estimate for the
third quarter remained static (at $2.21 a share) over the past week
and month. Estimate for 2012 has increased by a penny over the last
30 days while remaining stationary over the last 7 days. The
current Zacks Consensus Estimate for fiscal 2012 is $7.94,
representing an estimated year-over-year growth of 16.9%.
PPG Industries has a diversified business, both in terms of
products and geographical presence. We expect better pricing to
support the company's results in the third quarter.
Moreover, PPG Industries has a strong cash position, and continues
to utilize cash on earnings growth initiatives. The company has
been returning cash to its shareholders in the form of
uninterrupted dividend payouts. Its restructuring measures,
especially in its European operation, are also expected to fetch
cost savings in the third and fourth quarters this year.
However, raw material costs have been a matter of concern. Although
raw material costs have shown a moderating trend, the price of the
company's primary raw material TiO2 has been escalating. The
company expects raw material inflation to continue to weigh on its
results in the September and December quarters. Moreover, it may
continue to face lower volume across many of its end markets in
Europe in the third quarter.
PPG Industries, 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. We have a long-term Neutral
recommendation on the stock.