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PPG Industries (PPG) Beats on Earnings in Q4, Sales Miss

PPG IndustriesPPG reported adjusted earnings of $1.19 per share for the fourth quarter of 2016, up 1.6% from the year-ago figures of $1.16. The results beat the Zacks Consensus Estimate of $1.18 per share.

One-time charges of $236 million in the quarter include charges related to business restructuring, increase in legacy environmental reserves and asbestos settlement funding. Other expenses include premium on the early retirement of debt and $44 million for the loss on the sale of the European fiber glass business offset by a $33 million net gain on the disposals of ownership interests in business affiliates. Including these charges, net income from continuing operations was $77 million or 29 cents per share in the reported quarter, as against a profit of $295 million or $1.09 per share, a year ago.

Net sales in the quarter were down 1.6% year over year at $3,497 million. Sales trailed the Zacks Consensus Estimate of $3,552 million.

Unfavorable currency translation affected sales by 3%. The net effect of portfolio actions contributed less than 1% to total sales. Sales volume increased almost 2%.

Full-year Highlights

PPG Industries reported profits of $564 million, or $2.11 per share, for full-year 2016, down from $1.34 billion, or $4.89 per share, reported in 2015. Adjusted earnings for the year increased 7.2% to $5.82 per share.

For full-year 2016, net sales from continuing operations were $14.8 billion, consistent with the prior year. Unfavorable foreign currency translation impacted sales by almost 3%. Sales volume in the year grew 1% year on year and acquisitions related sales improved almost 2%, net of the European fiber glass divestiture.

PPG Industries Inc. Price, Consensus and EPS Surprise

PPG Industries Inc. Price, Consensus and EPS Surprise | PPG Industries Inc. Quote

Segment Review

Performance Coatings: The segment recorded $1.98 billion in sales and income of $239 million in the reported quarter. Sales at the segment fell less than 4% year over year. Currency translation reduced segment sales by about $70 million or 3%. Acquisition-related sales provided minimal benefit.

Segment income fell 4% year over year as favorable impact of cost management initiatives were more than offset by lower sales volume and currency headwinds. Automotive refinish coatings and architectural coatings - America and Asia Pacific sales grew at a low single digit clip in constant currencies, while the protective and marine coatings sales volumes declined.

Industrial Coatings: Sales at the segment were $1.44 billion, up almost 5% from the prior-year period. Total sales volume improved by almost 5%, led by high growth in the emerging markets.

Net income for the segment was $236 million, down less than 2% year over year. The decline was largely driven by higher transportation and logistics costs along with unfavorable currency translation, which more than offset growth in sales volume and continued lower costs from restructuring and manufacturing cost efficiencies as well as acquisition-related income.

Glass Segment: Sales were down 34% at $80 million, mainly due to the divestiture of the European fiber glass business. Sales volume for the remaining fiber glass business was down 3%. The company now operates only the North American fiber glass business. The flat glass business, the fiber glass businesses in Europe and fiber glass joint ventures in Asia have been discontinued. The segment's income was $12 million, up from $11 million in the prior-year quarter, due to cost management initiatives.

Financial Position

PPG Industries ended the quarter with a cash balance of $1,820 million, up 38.8% year over year. Long-term debt fell 5.9% year over year to $3,787 million.

PPG Industries repurchased shares worth $650 million in fourth quarter of 2016. With the repurchase in the quarter, the company achieved the higher end of the cash deployment objective of $2-$2.5 billion it had set for 2015-2016.

Outlook

PPG Industries expects an improvement in global growth, with improvement rates in developed regions gradually rising and continuing in emerging regions. The company has recently initiated a new restructuring program which is expected to generate $125 million in annual savings.

PPG Industries aims to boost shareholder returns with cash deployment. The company anticipates deploying $2.5-$3.5 billion cash in acquisitions and share repurchases for 2017 and 2018 combined.

PPG Industries' shares have gained almost 3.4% in the last year while the Zacks categorized ' Chemicals-Diversified ' industry has gained about 35% over the same period.

Zacks Rank & Key Picks

PPG Industries currently carries a Zack Rank #3 (Hold).

Better-ranked companies in the diversified chemical space include BASF SE BASFY , Methanex Corp. MEOH and Kronos Worldwide, Inc. KRO , all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

BASF has a long-term growth rate of 7.7%.

Methanex has a long-term growth rate of 15%.

Kronos has a long-term growth rate of 5%.

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PPG Industries Inc. (PPG): Free Stock Analysis Report

BASF SE (BASFY): Free Stock Analysis Report

Methanex Corp. (MEOH): Free Stock Analysis Report

Kronos Worldwide Inc. (KRO): 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.


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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