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Why You Should Retain PPG Industries (PPG) in Your Portfolio
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PPG Industries, Inc. (PPG - Free Report) is gaining from favorable market conditions, pricing actions, enhanced manufacturing efficiencies, cost discipline and acquisitions amid headwinds from demand weakness in Europe and China.
The company’s shares are up 10.4% over a year, compared with 13.5% rise of its industry.
Image Source: Zacks Investment Research
Let’s find out why this Zacks Rank #3 (Hold) stock is worth retaining at the moment.
Cost & Pricing Actions, Acquisitions Drive PPG
PPG Industries is benefiting from higher pricing across its segments, manufacturing efficiencies, cost actions and efforts to grow its business through acquisitions.
The company is implementing a cost-cutting and restructuring strategy, as well as optimizing its working capital requirements. The cost savings generated by these restructuring initiatives will act as a tailwind for the company. PPG Industries has undertaken extensive restructuring efforts to reduce its cost structure, primarily focusing on regions and end markets with weak business conditions. The company achieved $15 million in incremental cost reductions through restructuring programs and acquisition synergies in the second quarter of 2023.
PPG Industries is also raising selling prices across its business segments to offset the impact of raw material and other cost inflation and drive profitability. Significant progress has been made in increasing consolidated segment margins, which were more than 16% in the second quarter, up 330 basis points from the year-ago quarter. Pricing measures are likely to continue to support its margins in the remainder of 2023.
The company is also undertaking measures to grow business inorganically through value-creating acquisitions. Contributions from the acquisitions are expected to get reflected in its performance in 2023. Acquisitions, including Tikkurila, Worwag and Cetelon, are likely to contribute to its top line this year.
PPG Industries also remains committed to boost shareholder returns with cash deployment. It has an impressive record of returning cash to shareholders through dividends and share buybacks. The company, in July 2023, raised its quarterly dividend by around 5% to 65 cents per share. In 2022, the company returned around $570 million to shareholders through dividends and about $190 million through share repurchases. It also paid dividends worth around $146 million in the second quarter of 2023.
Weaker Demand Ails
The company remains exposed to soft demand conditions in Europe and China. Industrial production remains muted, mainly due to cautious consumer buying behavior in Europe and a slow recovery in China. Moreover, softening demand in certain end-use markets in the United States adds to the difficulties. Geopolitical issues in Europe arising from the Russia-Ukraine conflict impacted demand, while the lingering impacts of pandemic-related restrictions in China led to increased economic uncertainties during the second quarter.
PPG Industries anticipates a low single-digit percentage decline in organic sales in its Industrial Coatings unit in the third quarter of 2023 due to lower global industrial production. While automotive is expected to remain strong, other industrial end-use markets, including industrial coatings and packaging coatings, are anticipated to be soft in the third quarter.
Better-ranked stocks worth a look in the basic materials space include Carpenter Technology Corporation (CRS - Free Report) Hawkins, Inc. (HWKN - Free Report) and Alamos Gold Inc. (AGI - Free Report) .
The Zacks Consensus Estimate for current fiscal-year earnings for CRS is currently pegged at $3.48, implying year-over-year growth of 205.3%. Carpenter Technology currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Carpenter Technology has a trailing four-quarter earnings surprise of roughly 10%, on average. The stock has rallied around 86% in a year.
Hawkins currently carrying a Zacks Rank #1. It has a projected earnings growth rate of 18.9% for the current year.
Hawkins has a trailing four-quarter earnings surprise of roughly 25.6%, on average. HWKN shares are up around 51% in a year.
Alamos Gold currently carries a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for AGI's current-year earnings has been revised 13.2% upward over the past 60 days.
The Zacks Consensus Estimate for current fiscal-year earnings for Alamos Gold is currently pegged at 43 cents, implying year-over-year growth of 53.6%. AGI shares have gained around 69% in a year.
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Why You Should Retain PPG Industries (PPG) in Your Portfolio
PPG Industries, Inc. (PPG - Free Report) is gaining from favorable market conditions, pricing actions, enhanced manufacturing efficiencies, cost discipline and acquisitions amid headwinds from demand weakness in Europe and China.
The company’s shares are up 10.4% over a year, compared with 13.5% rise of its industry.
Image Source: Zacks Investment Research
Let’s find out why this Zacks Rank #3 (Hold) stock is worth retaining at the moment.
Cost & Pricing Actions, Acquisitions Drive PPG
PPG Industries is benefiting from higher pricing across its segments, manufacturing efficiencies, cost actions and efforts to grow its business through acquisitions.
The company is implementing a cost-cutting and restructuring strategy, as well as optimizing its working capital requirements. The cost savings generated by these restructuring initiatives will act as a tailwind for the company. PPG Industries has undertaken extensive restructuring efforts to reduce its cost structure, primarily focusing on regions and end markets with weak business conditions. The company achieved $15 million in incremental cost reductions through restructuring programs and acquisition synergies in the second quarter of 2023.
PPG Industries is also raising selling prices across its business segments to offset the impact of raw material and other cost inflation and drive profitability. Significant progress has been made in increasing consolidated segment margins, which were more than 16% in the second quarter, up 330 basis points from the year-ago quarter. Pricing measures are likely to continue to support its margins in the remainder of 2023.
The company is also undertaking measures to grow business inorganically through value-creating acquisitions. Contributions from the acquisitions are expected to get reflected in its performance in 2023. Acquisitions, including Tikkurila, Worwag and Cetelon, are likely to contribute to its top line this year.
PPG Industries also remains committed to boost shareholder returns with cash deployment. It has an impressive record of returning cash to shareholders through dividends and share buybacks. The company, in July 2023, raised its quarterly dividend by around 5% to 65 cents per share. In 2022, the company returned around $570 million to shareholders through dividends and about $190 million through share repurchases. It also paid dividends worth around $146 million in the second quarter of 2023.
Weaker Demand Ails
The company remains exposed to soft demand conditions in Europe and China. Industrial production remains muted, mainly due to cautious consumer buying behavior in Europe and a slow recovery in China. Moreover, softening demand in certain end-use markets in the United States adds to the difficulties. Geopolitical issues in Europe arising from the Russia-Ukraine conflict impacted demand, while the lingering impacts of pandemic-related restrictions in China led to increased economic uncertainties during the second quarter.
PPG Industries anticipates a low single-digit percentage decline in organic sales in its Industrial Coatings unit in the third quarter of 2023 due to lower global industrial production. While automotive is expected to remain strong, other industrial end-use markets, including industrial coatings and packaging coatings, are anticipated to be soft in the third quarter.
PPG Industries, Inc. Price and Consensus
PPG Industries, Inc. price-consensus-chart | PPG Industries, Inc. Quote
Stocks to Consider
Better-ranked stocks worth a look in the basic materials space include Carpenter Technology Corporation (CRS - Free Report) Hawkins, Inc. (HWKN - Free Report) and Alamos Gold Inc. (AGI - Free Report) .
The Zacks Consensus Estimate for current fiscal-year earnings for CRS is currently pegged at $3.48, implying year-over-year growth of 205.3%. Carpenter Technology currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Carpenter Technology has a trailing four-quarter earnings surprise of roughly 10%, on average. The stock has rallied around 86% in a year.
Hawkins currently carrying a Zacks Rank #1. It has a projected earnings growth rate of 18.9% for the current year.
Hawkins has a trailing four-quarter earnings surprise of roughly 25.6%, on average. HWKN shares are up around 51% in a year.
Alamos Gold currently carries a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for AGI's current-year earnings has been revised 13.2% upward over the past 60 days.
The Zacks Consensus Estimate for current fiscal-year earnings for Alamos Gold is currently pegged at 43 cents, implying year-over-year growth of 53.6%. AGI shares have gained around 69% in a year.