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What's in Store for PPG Industries (PPG) in Q2 Earnings?

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PPG Industries Inc. (PPG - Free Report) is set to release second-quarter 2017 results ahead of the bell on Jul 20.

In the last quarter, PPG Industries reported adjusted earnings of $1.35 per share, up 6.3% from the year-ago figure. Earnings beat the Zacks Consensus Estimate of $1.31 per share. Net sales inched up 0.7% year over year to $3,569 million, beating the Zacks Consensus Estimate of $3,533 million.

PPG Industries has surpassed the Zacks Consensus Estimate in three of the trailing four quarters, with an average positive surprise of 1.11%.

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

Factors at Play

PPG Industries has underperformed the Zacks categorized Chemicals-Diversified industry over a year. The company’s shares have gained around 3.2% over this period compared with roughly 20.5% gain recorded by the industry.

PPG Industries expects a modest improvement in global growth, particularly in developed regions and continuing moderated growth rates in emerging regions.

PPG Industries repurchased shares worth $165 million in first-quarter 2017. With the move, the company reaffirmed its plans to deploy at least $2.5 billion to $3.5 billion of cash on acquisitions and share repurchases in 2017 and 2018.

PPG Industries is exposed to unfavorable currency exchange translation, especially in emerging markets. It also faces macroeconomic challenges and volatility in raw materials and energy costs.

The company expects higher raw materials costs on a year-over-year basis in second-quarter 2017. Moreover, some of its end markets, including marine, still remain sluggish. Weakness in marine ship building activity is affecting protective and marine coatings volumes. The company is also seeing weakness in the wood and coil markets.

However, PPG Industries is witnessing strength in the North American automotive market. Further, an aggressive cost-cutting and restructuring strategy should act as a positive catalyst for the company. The restructuring actions are expected to deliver $120-$130 million in annual savings, with $40-$50 million of savings expected to be realized in 2017.

PPG Industries, Inc. Price and EPS Surprise

Earnings Whispers

Our proven model does not conclusively show that PPG Industries is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here as you will see below:

Zacks ESP: Earnings ESP for PPG Industries is currently pegged at 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at $1.80. 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).

Note that we caution against stockes with a Zacks Rank #4 or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

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

Endeavour Silver Corp. (EXK - Free Report) has an Earnings ESP of +100% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Westlake Chemical Corporation (WLK - Free Report) has an Earnings ESP of +5.04% and a Zacks Rank #2.

The Chemours Company (CC - Free Report) has an Earnings ESP of +4.44% and a Zacks Rank #2.

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