PPG Industries Tops Q4 Earnings, Profit Up - Analyst Blog

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Coatings giant PPG Industries' ( PPG ) recorded adjusted earnings from continuing operations (excluding acquisition-related expenses of $4 million or 3 cents per share) of $1.81 a share for fourth-quarter 2013, up 45% year over year from $1.25 per share reported in the year-ago quarter. The results exceeded the Zacks Consensus Estimate of $1.73 per share. 

The company has delivered 14 straight quarters of record adjusted earnings (including the fourth quarter), fueled by a strong coatings portfolio, broad global footprint, prudent cash deployment and measurable results from the strategic actions.

Profit from continued operation (as reported) was $254 million or $1.78 per share in the fourth quarter, surging roughly 33% from $191 million or $1.23 per share posted in the prior-year quarter. Healthy results in the fourth quarter were also backed by continuing operating and cost discipline coupled with a higher level of organic sales growth.

Revenues rose 14% year over year to $3,702 million in the quarter from $3,243 million in the year-ago quarter. It was also ahead of the Zacks Consensus Estimate of $3,698 million. The year-over-year rise is attributable to higher industry demand in aerospace and automotive OEM coatings. The results were also aided by stabilizing regional demand in Europe.

For full-year 2013, adjusted earnings from continued operations was $8.28 per share (excluding acquisition-related expenses), up 29% year over year from $6.44 per share recorded in 2012. The results topped the Zacks Consensus Estimate of $8.20. Profit from continued operation (as reported), totaled $1 billion or $7.13 per share versus $726 million or $4.69 a share in 2012.

For full-year 2013, revenues increased 12% to $15.1 billion from $13.5 billion in 2012, in line with the Zacks Consensus Estimate.

Segment Highlights

Revenues from the Performance Coatings division shot up 25% year over year to $1.4 billion in the quarter as gains from acquisitions more than offset a decline in volumes. The company saw higher sales across aerospace, automotive refinish and North American architectural coatings businesses.

Sales from the Industrial Coatings segment moved up 10% to $1.2 billion on the back of volume gains in the automotive OEM coatings business and contributions from acquisitions. Volume rose across all regions.

Revenues from the Architectural Coatings (Europe, Middle East and Africa) division edged up 0.2% to $466 million as positive currency impact was offset by lower volumes. Despite lower volumes, the segment earnings were higher than the prior year quarter due to lower costs, including benefits from completed restructuring actions and ongoing discretionary cost management. 

Optical and Specialty Materials sales rose 14% to $309 million in the quarter on improved optical products volumes and higher silicas sales on strong demand.

Sales from the Glass segment rose roughly 9.5% to $264 million on improved volumes for both fiber and flat glass and better flat glass pricing.

Financials

PPG Industries ended 2013 with cash and cash equivalents of $1,116 million, down around 15% from $1,306 million recorded a year ago. Long-term debt was $3,372 million as of Dec 31, 2013, compared with $3,368 million as of Dec 31, 2012. 

Outlook

Moving ahead, PPG Industries envisions growth to remain broadest in the U.S. with healthy trends across several coatings end-use markets. The company expects measured growth in the European region in 2014, which represents about one-third of its sales.

The company is ahead of schedule on achieving targeted acquisition-related cost synergies relating to the North American architectural coatings acquisition. It is focused on achieving the remaining synergies of the restructuring program approved in the third quarter 2013.

PPG Industries expects incremental cost savings to be between $75 million and $90 million in 2014. It also expects to deploy between $3 billion and $4 billion of cash in a disciplined manner on incremental earnings-growth initiatives over the next 18 to 24 months.

PPG Industries, a Zacks Rank #2 (Buy) stock, has a diversified base of products and markets, and looks to grow its businesses strategically along with controlling costs. However, the company remains challenged by a weak European market.

Other chemical companies with favorable Zacks Rank are L'Air Liquide SA ( AIQUY ), Johnson Matthey plc ( JMPLY ) and LyondellBasell Industries NV ( LYB ). While both L'Air Liquide and Johnson Matthey hold a Zacks Rank #1 (Strong Buy), LyondellBasell retains a Zacks Rank #2 (Buy).



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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 The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: AIQUY , JMPLY , LYB , PPG

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