PPG Industries Held at Neutral - Analyst Blog


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On Oct 18, we reaffirmed our Neutral recommendation on PPG Industries ( PPG ). 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.  

Why Kept?

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 of AkzoNobel 's ( AKZOY ) 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 include FMC Corp. ( FMC ) and Huntsman Corp. ( HUN ) 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 Report

PPG INDS INC (PPG): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
More Headlines for: AKZOY , FMC , HUN , PPG

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