What's in the Cards for PPG Industries (PPG) in Q4 Earnings?

PPG Industries Inc . PPG is set to release fourth-quarter 2017 results ahead of the bell on Jan 18.

Last quarter, PPG Industries reported earnings from continuing operations of $1.52 per share against the year-ago loss of 79 cents. Earnings were in line with the Zacks Consensus Estimate. Net sales increased 3.2% year over year to $3,776 million, beating the Zacks Consensus Estimate of $3,748 million.

PPG Industries surpassed the Zacks Consensus Estimate in three of the trailing four quarters with an average beat of 1.25%.

However, the company underperformed the industry over the past six months. While PPG Industries' shares have gained around 4.6%, the industry gained roughly 17.4%.

Let's see how things are shaping up for this announcement.

Factors at Play

PPG Industries, in its third-quarter call, said that it expects continued moderate global economic growth. Post the mayhem caused by the recent natural disasters, the company does not anticipate any further decline in the level of raw material cost inflation. In the third quarter, currency exchange translation had favorable impact on the company's performance and is expected to remain a tailwind in the to-be-reported quarter.

Furthermore, the company sees an additional increase in selling price. Also, it remains on track with its restructuring program that is expected to deliver savings of more than $45 million for full-year 2017.

PPG Industries is also taking steps for growing organically as well as cutting costs. The company also remains committed to deploy cash on acquisitions and share repurchases. The company's board, last month, authorized it to buyback outstanding common stock worth $2.5 billion.

However, lingering impacts of natural disasters (hurricanes and earthquakes) may continue to affect sales volume and margins in the fourth quarter. PPG Industries expects natural disasters to unfavorably impact fourth-quarter earnings by up to 5 cents per share. Some raw material inflation is also expected in the fourth quarter due to supply related issues.

For the company's the Industrial Coatings segment, the Zacks Consensus Estimate for net sales is expected to be $1,523 million for the fourth quarter, reflecting an estimated 2.5% rise on a sequential comparison basis. Segment income is also expected to increase 7.1% sequentially as the Zacks Consensus Estimate is $240 million for the fourth quarter.

Net sales for PPG Industries' Performance Coatings segment, for the fourth quarter is expected to witness a 10.1% decline from the previous quarter. The Zacks Consensus Estimate for fourth-quarter revenues for the unit is pegged at $2,059 million. Segment income is also expected to decline 35.1% sequentially as the Zacks Consensus Estimate is pegged at $237 million for the fourth quarter. The segment is expected to be affected by the adverse impact of natural disasters.

PPG Industries, Inc. Price and EPS Surprise

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

Earnings Whispers

Our proven model does not conclusively show that PPG Industries is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both - a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) - for this to happen. This is not the case here as you will see below:

Zacks ESP : Earnings ESP for PPG Industries is currently pegged at -1.85%. This is because the Most Accurate estimate is $1.17 while the Zacks Consensus Estimate is pegged at $1.19. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks Rank : PPG Industries carries a Zacks Rank #3, which when combined with a negative ESP, makes surprise prediction difficult.

Stocks With Favorable Combination

Here are some companies in the chemical space that investors may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

LyondellBasell Industries NV LYB has an Earnings ESP of +1.2% and a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here .

Huntsman Corporation HUN has an Earnings ESP of +9.38% and a Zacks Rank #2.

Dow Chemical Company DWDP has an Earnings ESP of +8.7% and a Zacks Rank #3.

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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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