On Oct 18, we reaffirmed our Neutral recommendation on
). While it should gain from strength across North American
automotive OEM and aerospace markets, we remain on the sidelines
factoring in the lingering weakness in the European market.
The coatings giant topped earnings expectations in the third
quarter of 2013, reported on Oct 17, on the heels of improving
demand trends across major markets, cost reduction measures and
continued strong performance of its coatings business, supported
by strength across aerospace and automotive markets.
Adjusted earnings of $2.44 per share for the quarter
outstripped the Zacks Consensus Estimate by 10 cents. Reported
profit, however, slid on sizable restructuring and other charges.
Revenues rose by double digits and beat expectations. While the
company expects sustained improvement in demand trends, it sees a
seasonally weaker fourth quarter.
PPG Industries has a diversified business, both in terms of
products offered and geographical presence. It has a leading
position in several paints and coatings end markets.
PPG Industries is taking steps to grow its business
inorganically by making a number of acquisitions. The acquisition
) North American architectural coatings business has reinforced
its branded paint product offerings and scale in the North
American architectural paint market. PPG Industries has already
achieved more than half of the expected synergies of $200 million
from the acquisition.
Moreover, PPG Industries is pursuing a $102 million business
restructuring focused on achieving cost synergies associated with
the North American architectural coatings business takeover. The
company also has an impressive record of returning cash to
shareholders through dividends and share buybacks.
However, PPG Industries may face macroeconomic challenges
going ahead. While the company had a decent third quarter, it may
continue to face softness in Europe with weak economic activity
and a challenging demand environment. Volumes remain in the
negative territory in Europe.
Moreover, PPG Industries remains exposed to raw material cost
pressure. Some of the key end markets such as non-residential
construction, protective and marine coatings and EMEA
architectural coatings remain sluggish.
Other Stocks to Consider
Other companies in the chemical industry worth considering
) with both carrying a Zacks Rank #2 (Buy).
AKZO NOBEL NV (AKZOY): Get Free Report
FMC CORP (FMC): Free Stock Analysis Report
HUNTSMAN CORP (HUN): Free Stock Analysis
PPG INDS INC (PPG): Free Stock Analysis
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