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PPG Industries (PPG) Tops Q3 Earnings and Revenue Estimates

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PPG Industries Inc. (PPG - Free Report) logged net income from continuing operations of $344 million or $1.43 per share in third-quarter 2021, down from the year-ago quarter’s profit of $442 million or $1.86 per share.

Barring one-time items, adjusted earnings were $1.69 per share in the reported quarter, down from $2.03 logged in the year-ago quarter. However, the figure topped the Zacks Consensus Estimate of $1.56.

Net sales rose roughly 19% year over year to $4,372 million. The figure beat the Zacks Consensus Estimate of $4,241.5 million. Selling prices increased 6%, while sales volumes fell 2%.

The company benefited from higher year-over-year sales in the Industrial Coatings segment in the quarter, led by selling price increases. It also witnessed strength in the Performance 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 $2.8 billion in the third quarter, up around 23% year over year. Sales volume in the segment inched down around 1%. Selling prices rose 5%.

Segment income declined roughly 4% year over year to $408 million. The downside can be attributed to the impact of raw material cost inflation and lower sales volumes, partly offset by higher selling prices, acquisition-related earnings and restructuring cost savings.

Industrial Coatings: Sales in the segment totaled around $1.6 billion, up around 13% from the prior-year quarter’s figure. Sales volumes declined 4% year over year and selling prices were up 7% year over year.

Net income in the segment totaled $140 million, down around 45% year over year. It was lower than the previous year’s levels primarily due to raw material cost inflation and reduced automotive OEM coatings sales volumes. The downside was partly offset by higher selling prices and restructuring cost savings.

Financials

PPG Industries ended the third quarter with cash and cash equivalents of $1,216 million, down roughly 39.4% year over year. Long-term debt rose around 26.2% year over year to $6,092 million.

Moreover, PPG Industries delivered around $35 million of cost savings from business restructuring programs in the reported quarter. The company forecasts full-year 2021 cost savings of $135 million.

Outlook

The company expects ongoing supply chain disruptions to continue throughout the fourth quarter, with potential additional impacts from the recent industrial production curtailments in China. It forecasts these disruptions to ease modestly in overall quantity and magnitude as the quarter progresses.

It will continue to prioritize further selling price increases and expects price realization to fully offset raw material cost inflation in early 2022.

Moreover, the recovery of the automotive original equipment manufacturer (OEM), aerospace, and automotive refinish coatings businesses will be a key catalyst for growth in 2022. It will continue to aggressively manage all aspects of its cost structure, the company noted.

PPG Industries also expects net sales volumes to be down 8-10% year over year in the fourth quarter. Corporate expenses are projected to be $50-55 million in the fourth quarter. Net interest expenses are expected between $25 million and $27 million.

The company also sees adjusted earnings for the full year to be $6.67-$6.73 per share.

Price Performance

Shares of PPG Industries have rallied 20% in the past year compared with a 23% rise of the industry.

Zacks Investment ResearchImage Source: Zacks Investment Research

Zacks Rank & Other Key Picks

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

Some better-ranked stocks in the basic materials space are Nucor Corporation (NUE - Free Report) , The Chemours Company (CC - Free Report) and Olin Corporation (OLN - Free Report) .

Nucor has a projected earnings growth rate of around 581.1% for the current year. The company’s shares have soared 111.2% in a year. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Chemours has an expected earnings growth rate of around 86.4% for the current year. The company’s shares have gained 41.1% in the past year. It currently carries a Zacks Rank #2 (Buy).

Olin has an expected earnings growth rate of around 677% for the current year. The company’s shares have surged 209.3% in the past year. It currently flaunts a Zacks Rank #1.