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What's in the Offing for PPG Industries' (PPG) in Q4 Earnings?

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PPG Industries Inc. (PPG - Free Report) is set to release fourth-quarter 2019 results ahead of the bell on Jan 16. The paint giant’s results will likely reflect the benefits of its cost management initiatives and pricing actions. However, unfavorable impacts of soft industrial demand, cost inflation and currency headwind are likely to have affected its performance.

PPG Industries has an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with a positive surprise of 6.1%, on average.

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

What do the Estimates Say?

The Zacks Consensus Estimate for revenues for PPG Industries for the to-be-reported quarter stands at $3,662 million, suggesting an expected year-over-year rise of 0.5%.

For the company’s Industrial Coatings unit, net sales are expected to decrease 0.6% year over year as the Zacks Consensus Estimate is $1,496 million for the fourth quarter. The same for the Performance Coatings segment is pegged at $2,143 million, essentially flat on a year-over-year comparison basis.

Factors at Play

PPG Industries faces challenges from sluggish global industrial activities. The company saw soft industrial production growth across all regions through the first three quarters of 2019. Headwinds from weak industrial demand are likely to have negatively impacted its fourth-quarter sales volumes.

Moreover, the company faces headwind from unfavorable currency translation. Currency swings reduced its sales by around 2% or around $80 million in the third quarter. Moreover, earnings were negatively affected by roughly $10 million or 4 cents per share due to unfavorable foreign currency translation. Some unfavorable currency impact is expected to get reflected in fourth-quarter results.

PPG Industries is also exposed to cost inflation. It witnessed inflationary impacts in the third quarter due to higher wage, warehouse, and freight & distribution costs. The company’s fourth-quarter results are expected to continue to reflect the impact of cost inflation.

Nevertheless, the company is aggressively managing costs and is also implementing appropriate pricing actions. It remains focused on improving its cost structure and recovering margins through price increases amid an inflationary environment. PPG Industries expects to achieve $20 million in cost savings in the fourth quarter. The company is also taking steps to grow business inorganically through strategic acquisitions. Benefits of these initiatives might reflect on the company’s bottom line in the December quarter.

PPG Industries, Inc. Price and EPS Surprise

 

PPG Industries, Inc. Price and EPS Surprise

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

Earnings Whispers

Our proven model does not conclusively predict that PPG Industries is likely to beat the Zacks Consensus Estimate this quarter. 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 -3.47%. The Zacks Consensus Estimate for the fourth quarter currently stands at $1.35. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
 
Zacks Rank: PPG Industries carries a Zacks Rank #4 (Sell).  

Stocks to Consider

Here are some 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:

Pan American Silver Corp. (PAAS - Free Report) has an Earnings ESP of +3.28% and carries a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Freeport-McMoRan Inc. (FCX - Free Report) has an Earnings ESP of +357.14% and carries a Zacks Rank #3.

Nucor Corporation (NUE - Free Report) has an Earnings ESP of +4.86% and carries a Zacks Rank #3.

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