PPG Industries (PPG Quick QuotePPG - Free Report) provided an update on the impact of the recent natural disasters on its operations and also issued its third-quarter guidance.

 

The recent hurricanes that originated in the Atlantic Ocean and the earthquakes that occurred in Mexico impacted employees in Texas, Florida and the adjacent states, Mexico, Puerto Rico and other parts of Caribbean. The company reported that though its properties suffered damage, it is on its way to resume operations. Also, the company assumes certain amount of inventory that will not be recoverable. The disruption of supply chain has been the most significant impact from hurricanes. This has had a ripple effect on the company’s operations throughout the United States and Mexico. 

 

The company anticipates the impacts from hurricanes and earthquakes to affect its third-quarter earnings by 5 cents to 10 cents. This includes increased transportation and logistics costs to move raw materials and inventory to avoid PPG Industries’ customer disruptions, increased raw materials costs, facility and inventory damage net of any insurance recoveries, and the impact from lower sales in the affected areas. 

 

PPG Industries expects third-quarter volume growth rate to be above 1.5%, exceeding the growth rate for first-half 2017. In the third quarter, moderate raw material cost inflation was earlier anticipated by the company. As a result of high levels of inflation persisting due to ongoing impacts from supplier outages in Europe and continued mandatory curtailments of raw material production in China, the company expects third-quarter inflation rate to match or possibly exceed the sequentially prior quarter, excluding the hurricane impacts. 

 

Inclusive of the recent business trends and hurricane effects, PPG Industries expect third-quarter earnings per share from continuing operations to be $1.48-$1.55. 

 

PPG Industries has underperformed the industry over a year. The company’s shares have moved up around 5.1% over this period, compared with roughly 27.7% gain recorded by the industry.

 

 

PPG Industries expects modest global economic growth. Also, the company anticipates a higher level of earnings-accretive cash deployment in the second half of 2017 including acquisitions and share repurchases. 

 

PPG Industries is taking steps for growing organically. The company is also taking measures to lower costs. The company also remains committed to deploy cash on acquisitions and share repurchases. It plans to deploy $2.5-$3.5 billion cash for acquisitions and share repurchases in 2017 and 2018 combined and is now targeting the top end of that range at a minimum. Additionally, the company remains on track with its cost cutting and restructuring actions and is expected to deliver $120-$130 million in annual savings, with $40-$50 million of savings expected to be realized in 2017.

 

However, PPG Industries faces currency headwind and macroeconomic challenges. Some of its end-markets including marine still remain sluggish. It is also exposed to raw materials cost pressure.
 

 

 

Some better-ranked stocks in the chemical space are Arkema SA (ARKAY Quick QuoteARKAY - Free Report) , Koppers Holdings Inc. (KOP Quick QuoteKOP - Free Report) and Air Products and Chemicals, Inc. (APD Quick QuoteAPD - Free Report) . 

 

Arkema has expected long-term earnings growth of 12.8% and sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

 

Koppers Holdings has expected long-term earnings growth of 18% and flaunts a Zacks Rank #1.

 

Air Products has expected long-term earnings growth of 12.1% and carries a Zacks Rank #2 (Buy).

 

 

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