We have reaffirmed our Neutral recommendation on
) following its mixed second-quarter 2013 results. While the
company is expected to benefit from strength across the North
American automotive OEM and aerospace markets, we maintain our
cautious stance factoring in the lingering weakness in the
The coatings giant beat earnings expectations in the second
quarter, reported on Jul 18, riding on its cost reduction
initiatives and strong results from its coatings business, backed
by sales gains across automotive OEM and aerospace
Adjusted earnings of $2.45 per share for the quarter topped
the Zacks Consensus Estimate of $2.34. Revenues rose by double
digits but missed expectations. Strong momentum across North
America and Asia was somewhat masked by sustained weakness in
Europe. The company expects earnings momentum to continue in the
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 the North American architectural coatings business of Dutch
) has expanded PPG Industries' branded paint product offerings
and scale in the North American architectural paint market.
PPG Industries is pursuing restructuring of its European
operation, which is expected to fetch meaningful cost savings
this year. Moreover, the company's Board recently cleared a new
$102 million business restructuring program focused on achieving
cost synergies associated with the North American architectural
coatings business takeover. PPG Industries also has an impressive
record of returning cash to shareholders through dividends and
However, PPG Industries is expected to continue to face
macroeconomic challenges going ahead. While the company had a
decent second quarter, it expects continued softness in Europe
with declining economic activity and foresees a challenging
demand environment in the region.
Moreover, PPG Industries remains exposed to raw material cost
pressure. Some of the key end markets such as non-residential
construction, architectural coatings and electronics also remain
Other Stocks to Consider
Other companies in the chemical industry that are worth
Cytec Industries Inc.
Northern Technologies International Corp.
) with both retaining a Zacks Rank #1 (Strong Buy).
AKZO NOBEL NV (AKZOY): Get Free Report
CYTEC INDS INC (CYT): Free Stock Analysis
NORTHERN TECH (NTIC): Free Stock Analysis
PPG INDS INC (PPG): Free Stock Analysis
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