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PPG Industries (PPG) Surpasses Q1 Earnings & Sales Estimates

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PPG Industries Inc. (PPG - Free Report) logged net income from continuing operations of $378 million or $1.58 per share in first-quarter 2021, up from the year-ago quarter’s profit of $243 million or $1.02 per share.

Barring one-time items, adjusted earnings were $1.88 per share in the reported quarter, up from $1.31 logged in the year-ago quarter. The figure also topped the Zacks Consensus Estimate of $1.58.

Net sales rose roughly 15% year over year to $3,881 million. The figure surpassed the Zacks Consensus Estimate of $3,691.6 million. Sales volumes were up around 7% year over year on the back of continued global economic recovery. Favorable foreign currency translation impact was more than 3% while acquisition contributed around 3% to sales growth. Selling prices rose roughly 2%.

The company benefited from higher year-over-year sales in the Industrial Coatings segment in the quarter, led by demand improvements for automotive and general industrial coatings as well as continued strong packaging coatings sales. It also witnessed strength in its global architectural coatings business.

PPG Industries, Inc. Price, Consensus and EPS Surprise

 

PPG Industries, Inc. Price, Consensus and EPS Surprise

PPG Industries, Inc. price-consensus-eps-surprise-chart | PPG Industries, Inc. Quote

 

Segment Highlights

Performance Coatings: Net sales in the segment were around $2.3 billion in the first quarter, up around 16% year over year. Sales volume in the segment increased around 5%. Selling prices rose more than 2%.

Segment income increased roughly 40% year over year to $386 million. The upside was due to the impact of the improved sales volumes, increased selling prices and cost savings from continuing restructuring initiatives, partly offset by higher raw material and logistics costs.

Industrial Coatings: Sales in the segment totaled around $1.6 billion, up around 14% from the prior-year quarter’s figure. Sales volumes rose 10% year over year due to improved demand for automotive and general industrial coatings. Selling prices were also higher year over year.

Net income in the segment totaled $245 million, up around 35% year over year. Results were driven by restructuring cost savings, higher sales volumes and favorable currency impact, partly offset by higher raw material and logistics costs.

Financials

PPG Industries ended the first quarter with cash and cash equivalents of $1,808 million, down roughly 4.1% year over year. Long-term debt rose around 12.3% year over year to $5,336 million.

Moreover, PPG Industries delivered roughly $35 million of incremental structural cost savings from business restructuring programs in the reported quarter. The company forecasts full-year 2021 cost savings of around $125 million.

Outlook

Going forward, the company expects overall global coatings demand to continue to be broad-based in many of its end-use markets, including an eventual replenishment of many of its customers’ inventories.

Higher domestic flight activity in various parts of the world is also expected to support the gradual recovery in aftermarket aerospace coatings demand in the second half of 2021, PPG noted.

The company also expects to achieve further sales growth and earnings accretion from its recent acquisitions. It expects sequential net sales to rise a low-teen percentage in the second quarter compared with the first quarter and in-line with historical pre-pandemic sequential quarterly changes.

PPG Industries also expects structural cost savings from restructuring actions of roughly $30 million year over year in the second quarter. Corporate expenses are expected to increase to $55-60 million in the second quarter from $50 million in the first quarter. Net interest expense is expected to be between $27 million and $29 million.

The company also sees adjusted earnings for the second quarter to be $2.15 -$2.2 per share.

Price Performance

Shares of PPG Industries have rallied 65% in the past year compared with 72.1% rise of the industry.

Zacks Rank & Other Key Picks

PPG Industries currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the basic materials space are Fortescue Metals Group Limited (FSUGY - Free Report) , Nucor Corporation (NUE - Free Report) and Impala Platinum Holdings Limited (IMPUY - Free Report) .

Fortescue has a projected earnings growth rate of roughly 105% for the current fiscal. The company’s shares have surged 130% in a year. It currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank  stocks here.

Nucor has an expected earnings growth rate of around 171% for the current year. The company’s shares have gained 111.4% in the past year. It currently sports a Zacks Rank #1.

Impala has an expected earnings growth rate of 197.6% for the current fiscal. The company’s shares have rallied 244.1% in the past year. It currently flaunts a Zacks Rank #1.

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