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PPG Industries Well Placed on Acquisitions & Cost Actions

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On Jun 14, we issued an updated research report on coatings giant PPG Industries (PPG - Free Report) .

PPG Industries saw higher profits in the first quarter of 2016, aided by its cost-management initiatives and contributions of acquisitions. Adjusted earnings for the quarter beat the Zacks Consensus Estimate while revenues fell short of expectations.

The first quarter saw increased growth in Europe, and the company expects this trend to continue. It anticipates regional demand in the U.S. and Canada to improve incrementally year over year.

PPG Industries remains committed to deliver higher organic growth, including continued commercialization of its innovative, industry-leading coatings technologies.

The company is well placed to gain from continued strength across North American automotive and aerospace markets, synergies from acquisitions and cost-saving measures. Healthy momentum across automotive OEM, automotive refinish and aerospace markets are expected to support its results moving ahead.

The company’s cost containment measures through its restructuring program should also aid to its earnings. Its restructuring actions (includes right-sizing headcount and production capacity) are expected to deliver pre-tax savings of $100 million to $105 million by 2017.

PPG Industries is also taking steps to grow its business inorganically by making a number of acquisitions. The acquisition of Akzo Nobel’s (AKZOY - Free Report) North American architectural coatings business has reinforced its branded paint product offerings and scale in the North American architectural paint market.

In addition, the buyout of Mexico’s leading paint company – Comex – has boosted PPG’s foothold in Mexico and Central America by offering a leading architectural coatings portfolio. PPG Industries opened 190 stores in Mexico through Comex in 2015 and expects to open 170-200 stores in 2016. The company expects annual cost synergies from the acquisition to exceed its originally stated target of $45-$50 million by end-2016.
 
PPG Industries also has an impressive record of returning cash to shareholders through dividends and share buybacks. The company, in Apr 2016, raised its quarterly dividend by 11% to 40 cents per share. PPG Industries plans to deploy $2–$2.5 billion of cash over 2015–2016 toward acquisitions and share repurchases.

PPG Industries is a Zacks Rank #2 (Buy).

Other Stocks to Consider

Other well-placed companies in the diversified chemical space include Albemarle Corporation (ALB - Free Report) and Asahi Kasei Corporation (AHKSY - Free Report) , both sporting a Zacks Rank #1 (Strong Buy).

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