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PPG Industries (PPG) to Post Q4 Earnings: What's in Store?

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PPG Industries Inc. (PPG - Free Report) is set to release fourth-quarter 2021 results after the closing bell on Jan 20. The paint giant’s results will likely reflect the benefits of cost-cutting and restructuring actions. However, it is likely to have faced headwinds from raw material inflation and supply chain disruptions.

PPG Industries’ earnings beat the Zacks Consensus Estimate in three of the last four quarters. It has a trailing four-quarter earnings surprise of around 4.3%, on average. The company reported an earnings surprise of around 8.3% in the last reported quarter.

Shares of the company have gained 13.7% in the past year compared with a 9% rise of the industry.

Zacks Investment ResearchImage Source: Zacks Investment Research

Let’s see how things are shaping up for this announcement.

What do the Estimates Say?

The Zacks Consensus Estimate for PPG Industries’ revenues in the to-be-reported quarter is at $4,031 million, suggesting a year-over-year rise of 7.3%.

The Zacks Consensus Estimate for revenues in the Industrial Coatings unit is currently pegged at $1,571 million, calling for a decrease of around 1.2% year over year. The consensus mark for revenues in the Performance Coatings segment is pegged at $2,438 million, indicating about 15.5% year-over-year rise.

Factors at Play

The company’s fourth-quarter performance is expected to have benefited from cost-cutting and restructuring measures. PPG Industries announced significant restructuring actions, focusing on regions and end-use markets with the weakest business conditions. It expects roughly $25 million in cost savings from restructuring programs in the fourth quarter. The company is also expected to have benefited from its actions to raise selling prices.

The company is also undertaking measures to grow business inorganically through value-creating acquisitions. Contributions from the acquisitions are expected to get reflected in its December-quarter performance. PPG Industries expects Tikkurila, Ennis-Flint and Versaflex to contribute $230-$250 million to sales in the fourth quarter.

However, PPG Industries is expected to have faced headwinds from raw material and logistics cost inflation in the fourth quarter. The company expects raw material costs to be up around 30% year over year in the fourth quarter in Industrial Coatings and up 25% in Performance Coatings.

The company’s fourth-quarter sales volumes are likely to have been affected by lower automotive production due to shortages in semiconductor chips. It witnessed a sharp decline in automotive production levels due to the chip issue in the third quarter and the unfavorable impact is likely to have continued in the final quarter of 2021. Sales are also likely to have been impacted by supply-chain disruptions and logistic bottlenecks. Factoring in these headwinds, the company expects sales to be affected by around $250-$300 million in the fourth quarter. It also expects net sales volumes to be down 8-10% year over year in the quarter.

Zacks Model

Our proven model does not conclusively predict an earnings beat for PPG Industries this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. But that’s not the case here.

Earnings ESP: Earnings ESP for PPG Industries is -2.11%. The Zacks Consensus Estimate for earnings is currently pegged at $1.19. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

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

Stocks That Warrant a Look

Here are some companies in the basic materials space you may want to consider as our model shows these have the right combination of elements to post an earnings beat this quarter:

Olin Corporation (OLN - Free Report) , scheduled to release earnings on Jan 27, has an Earnings ESP of +1.95% and carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Olin's fourth-quarter earnings has been revised 4.1% upward over the past 60 days.The consensus estimate for OLN’s earnings for the quarter is currently pegged at $2.53.

CF Industries Holdings, Inc. (CF - Free Report) , expected to release earnings on Feb 16, has an Earnings ESP of +20.03% and sports a Zacks Rank #1.

The consensus estimate for CF Industries' fourth-quarter earnings has been revised 31.5% upward over the past 60 days. The Zacks Consensus Estimate for CF’s earnings for the quarter stands at $3.05.

Celanese Corporation (CE - Free Report) , scheduled to release earnings on Jan 27, has an Earnings ESP of +2.98% and carries a Zacks Rank #3.

The Zacks Consensus Estimate for Celanese's fourth-quarter earnings has been revised 0.6% upward over the past 60 days. The consensus estimate for CE’s earnings for the quarter is currently pegged at $5.05.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.