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PPG Industries (PPG) Poised on Cost Measures, Acquisitions
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On Sep 2, we issued an updated research report on coatings giant PPG Industries (PPG - Free Report) .
PPG Industries saw higher profits in the second quarter of 2016, aided by its cost-management initiatives and earnings-accretive cash deployment. Adjusted earnings for the quarter beat the Zacks Consensus Estimate while revenues missed expectations. Unfavorable currency translation weighed on sales.
The second quarter saw increased growth in Europe, Asia and Latin America. The company anticipates overall volume growth in the third quarter as it starts receiving benefits of growth initiatives undertaken in the past. As in the past, emphasis on cost reductions remains for the coming quarters.
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 in the North American automotive market, synergies from acquisitions and cost-saving measures. Organic sales of the company’s automotive refinished coatings business continue to grow and outperform the market, driven by strong demand for its market-leading waterborne products and favorable industry trends.
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-$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 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 more than 170 stores in 2016. The acquisition is expected to deliver meaningful annual cost synergies. Moreover, the acquisition of industrial coatings services provider MetoKote Corporation and its affiliates has provided PPG Industries with a platform to meet different customers’ critical coatings requirements.
However, PPG Industries remains exposed to currency headwinds. Currency impact reduced its sales by $95 million in the second quarter. It expects an unfavorable currency impact of $320-$350 million on its sales and $50-$60 million on its pre-tax earnings for full-year 2016.
PPG Industries also faces macroeconomic challenges, stemming from a sluggish global economy. In the industrial coatings business, the company is seeing weakness in the heavy-duty equipment market. Weakness in marine new-build market and soft demand in the oil and gas market are also affecting protective and marine coatings sales volumes.
Some better-ranked companies in the chemical space include The Chemours Company (CC - Free Report) , Innophos Holdings Inc and Innospec Inc. (IOSP - Free Report) , all sporting a Zacks Rank #1 (Strong Buy).
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PPG Industries (PPG) Poised on Cost Measures, Acquisitions
On Sep 2, we issued an updated research report on coatings giant PPG Industries (PPG - Free Report) .
PPG Industries saw higher profits in the second quarter of 2016, aided by its cost-management initiatives and earnings-accretive cash deployment. Adjusted earnings for the quarter beat the Zacks Consensus Estimate while revenues missed expectations. Unfavorable currency translation weighed on sales.
The second quarter saw increased growth in Europe, Asia and Latin America. The company anticipates overall volume growth in the third quarter as it starts receiving benefits of growth initiatives undertaken in the past. As in the past, emphasis on cost reductions remains for the coming quarters.
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 in the North American automotive market, synergies from acquisitions and cost-saving measures. Organic sales of the company’s automotive refinished coatings business continue to grow and outperform the market, driven by strong demand for its market-leading waterborne products and favorable industry trends.
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-$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 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 more than 170 stores in 2016. The acquisition is expected to deliver meaningful annual cost synergies. Moreover, the acquisition of industrial coatings services provider MetoKote Corporation and its affiliates has provided PPG Industries with a platform to meet different customers’ critical coatings requirements.
However, PPG Industries remains exposed to currency headwinds. Currency impact reduced its sales by $95 million in the second quarter. It expects an unfavorable currency impact of $320-$350 million on its sales and $50-$60 million on its pre-tax earnings for full-year 2016.
PPG Industries also faces macroeconomic challenges, stemming from a sluggish global economy. In the industrial coatings business, the company is seeing weakness in the heavy-duty equipment market. Weakness in marine new-build market and soft demand in the oil and gas market are also affecting protective and marine coatings sales volumes.
PPG Industries is a Zacks Rank #3 (Hold) stock.
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Other Stocks to Consider
Some better-ranked companies in the chemical space include The Chemours Company (CC - Free Report) , Innophos Holdings Inc and Innospec Inc. (IOSP - Free Report) , all sporting a Zacks Rank #1 (Strong Buy).
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>