PPG Gains on Cost Saving & Acquisitions Amid Weak Demand

We issued an updated research report on PPG Industries, Inc. PPG on Jul 15.

The company is taking steps to grow business through strategic acquisitions. The buyout of Whitford Worldwide in 2019 further strengthened its robust industrial coatings solutions portfolio, while the Hemmelrath acquisition expanded its range of automotive coating products. The acquisition of Dexmet Corporation also allows the company to add value to its customers by enhancing product offerings as well as expanding R&D capabilities. The purchase of Industria Chimica Reggiana also complements the company’s current product offerings for the automotive refinish and light industrial coatings industries. Acquisitions are expected to contribute to the company’s sales in 2020.

Moreover, PPG Industries is actively managing costs and taking appropriate pricing actions amid a challenging business environment. It remains focused on improving its cost structure and recovering margins through price hikes.

PPG Industries achieved roughly $20 million in cost savings from its restructuring programs in the first quarter of 2020. The company, in June, approved substantial restructuring actions to lower its global cost structure. The plan includes a voluntary separation program that was offered in the United States and Canada.

The company cited soft global economic conditions due to the coronavirus pandemic and related recovery pace in a few end-use markets coupled with other opportunities to optimize the supply chain and functional costs.

Upon completion, PPG Industries anticipates the planned actions to offer $160-$170 million in annual pre-tax cost savings, with roughly $25-$35 million of savings predicted in 2020. Moreover, the remainder of the annual cost savings is expected to be realized by the end of 2021.

Moreover, the company anticipates strong operating margin leverage as economic activities continue to improve.

However, PPG Industries faces challenges from muted demand across certain businesses due to the coronavirus outbreak. It expects customer demand to remain significantly impacted with declines continuing in automotive original equipment manufacturer (OEM), automotive refinish and aerospace coatings businesses.

PPG Industries is witnessing a reduction in automotive OEM industry production rates. Moreover, weaker demand due to lower miles driven is affecting volumes in automotive refinish. Customer shutdowns and lower miles flown globally are also hurting volumes in aerospace.

PPG Industries, Inc. Price and Consensus


PPG Industries, Inc. Price and Consensus

PPG Industries, Inc. price-consensus-chart | PPG Industries, Inc. Quote

Zacks Rank & Stocks to Consider

The company currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the basic materials space are Royal Gold, Inc. RGLD, Sandstorm Gold Ltd SAND and Harmony Gold Mining Company Limited HMY.

Royal Gold has a projected earnings growth rate of 62.1% for the current year. The company’s shares have gained 15.9% in a year. It currently has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Sandstorm Gold has a projected earnings growth rate of 55.6% for the current year. The stock has surged around 72% in a year. It currently has a Zacks Rank of 2 (Buy).

Harmony Gold has an expected earnings growth rate of 264.3% for 2020. The company’s shares have rallied 157.2% in the past year. It is presently a Zacks #2 Ranked player.

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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.

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