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Why You Should Retain PPG Industries (PPG) in Your Portfolio
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PPG Industries Inc. (PPG - Free Report) is expected to benefit from its cost management actions and synergies of acquisitions amid certain challenges including weak demand due to the coronavirus pandemic.
Shares of the paints giant are down 14.6% year to date compared with its industry’s 10.4% decline.
Let’s delve deeper to find out why this Zacks Rank #3 (Hold) stock is worth retaining at the moment.
What’s Aiding PPG?
PPG Industries is actively managing costs and taking appropriate pricing actions amid a challenging business environment. It remains focused on improving its cost structure and recovering margins through price hikes.
The company achieved roughly $20 million in cost savings from its restructuring programs in the first quarter of 2020. It has accelerated cost-saving initiatives and expects to deliver of $80-$90 million in restructuring savings in 2020.
PPG Industries is also taking steps to grow business through strategic acquisitions. The company, in early 2019, completed the acquisitions of Whitford Worldwide and Hemmelrath. The Whitford buyout further strengthened PPG Industries’ robust industrial coatings solutions portfolio while the Hemmelrath acquisition expanded its range of automotive coating products.
Moreover, the purchase of specialty materials maker, Dexmet Corporation, enables the company to add value to its customers by enhancing product offerings as well as expanding R&D capabilities. The acquisition of Industria Chimica Reggiana also complements the company’s current product offerings for the automotive refinish and light industrial coatings industries. Earlier this year, the company also closed the acquisition of Alpha Coating Technologies. Acquisitions are expected to contribute to the company’s sales in 2020.
Moreover, the company remains committed in its cash deployment with a focus on shareholder value creation over the long term. The company, in 2019, raised its quarterly dividend by 6% to 51 cents per share. It also paid dividend worth $120 million in the first quarter.
A Few Headwinds
The company is exposed to headwind from sluggish demand across certain businesses due to the coronavirus. Weak demand amid the pandemic is expected to hurt its sales volumes in the second quarter of 2020.
PPG Industries expects total sales volume for the second quarter to be down 30-35%. The company expects customer demand to remain significantly impacted with declines continuing in automotive original equipment manufacturer (OEM), automotive refinish and aerospace coatings businesses.
PPG Industries is seeing a reduction in automotive OEM industry production rates. It expects global automotive OEM industry builds to decline roughly 50% year over year in the second quarter. For industrial, it sees lower sales volumes across all major regions. Moreover, weaker demand due to lower miles driven is expected to hurt volumes in automotive refinish. The company also expects customer shutdowns and lower miles flown globally to hurt sales volumes in aerospace in the second quarter.
The company also faces headwinds from unfavorable currency translation. Unfavorable currency swings due to the strengthening of the U.S. dollar vis-à-vis a broad range of currencies reduced its sales by more than 2% or around $75 million in the first quarter and lowered its earnings by more than $10 million.
PPG Industries also sees currency translation headwinds to impact net sales by $140-$150 million in the second quarter. As such, unfavorable currency may exert pressure on its sales and margins.
Better-ranked stocks in the basic materials space are Agnico Eagle Mines Limited (AEM - Free Report) , Barrick Gold Corporation (GOLD - Free Report) and Franco-Nevada Corporation (FNV - Free Report) .
Agnico Eagle has a projected earnings growth rate of 74.2% for the current year. The company’s shares have gained roughly 27% in a year. It currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Barrick Gold has a projected earnings growth rate of 64.7% for the current year. The company’s shares have shot up around 73% in a year. It currently has a Zacks Rank #2 (Buy).
Franco-Nevada has a projected earnings growth rate of 19.2% for the current year. The company’s shares have surged around 68% in a year. It currently has a Zacks Rank #2.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
Image: Bigstock
Why You Should Retain PPG Industries (PPG) in Your Portfolio
PPG Industries Inc. (PPG - Free Report) is expected to benefit from its cost management actions and synergies of acquisitions amid certain challenges including weak demand due to the coronavirus pandemic.
Shares of the paints giant are down 14.6% year to date compared with its industry’s 10.4% decline.
Let’s delve deeper to find out why this Zacks Rank #3 (Hold) stock is worth retaining at the moment.
What’s Aiding PPG?
PPG Industries is actively managing costs and taking appropriate pricing actions amid a challenging business environment. It remains focused on improving its cost structure and recovering margins through price hikes.
The company achieved roughly $20 million in cost savings from its restructuring programs in the first quarter of 2020. It has accelerated cost-saving initiatives and expects to deliver of $80-$90 million in restructuring savings in 2020.
PPG Industries is also taking steps to grow business through strategic acquisitions. The company, in early 2019, completed the acquisitions of Whitford Worldwide and Hemmelrath. The Whitford buyout further strengthened PPG Industries’ robust industrial coatings solutions portfolio while the Hemmelrath acquisition expanded its range of automotive coating products.
Moreover, the purchase of specialty materials maker, Dexmet Corporation, enables the company to add value to its customers by enhancing product offerings as well as expanding R&D capabilities. The acquisition of Industria Chimica Reggiana also complements the company’s current product offerings for the automotive refinish and light industrial coatings industries. Earlier this year, the company also closed the acquisition of Alpha Coating Technologies. Acquisitions are expected to contribute to the company’s sales in 2020.
Moreover, the company remains committed in its cash deployment with a focus on shareholder value creation over the long term. The company, in 2019, raised its quarterly dividend by 6% to 51 cents per share. It also paid dividend worth $120 million in the first quarter.
A Few Headwinds
The company is exposed to headwind from sluggish demand across certain businesses due to the coronavirus. Weak demand amid the pandemic is expected to hurt its sales volumes in the second quarter of 2020.
PPG Industries expects total sales volume for the second quarter to be down 30-35%. The company expects customer demand to remain significantly impacted with declines continuing in automotive original equipment manufacturer (OEM), automotive refinish and aerospace coatings businesses.
PPG Industries is seeing a reduction in automotive OEM industry production rates. It expects global automotive OEM industry builds to decline roughly 50% year over year in the second quarter. For industrial, it sees lower sales volumes across all major regions. Moreover, weaker demand due to lower miles driven is expected to hurt volumes in automotive refinish. The company also expects customer shutdowns and lower miles flown globally to hurt sales volumes in aerospace in the second quarter.
The company also faces headwinds from unfavorable currency translation. Unfavorable currency swings due to the strengthening of the U.S. dollar vis-à-vis a broad range of currencies reduced its sales by more than 2% or around $75 million in the first quarter and lowered its earnings by more than $10 million.
PPG Industries also sees currency translation headwinds to impact net sales by $140-$150 million in the second quarter. As such, unfavorable currency may exert pressure on its sales and margins.
PPG Industries, Inc. Price and Consensus
PPG Industries, Inc. price-consensus-chart | PPG Industries, Inc. Quote
Stocks to Consider
Better-ranked stocks in the basic materials space are Agnico Eagle Mines Limited (AEM - Free Report) , Barrick Gold Corporation (GOLD - Free Report) and Franco-Nevada Corporation (FNV - Free Report) .
Agnico Eagle has a projected earnings growth rate of 74.2% for the current year. The company’s shares have gained roughly 27% in a year. It currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Barrick Gold has a projected earnings growth rate of 64.7% for the current year. The company’s shares have shot up around 73% in a year. It currently has a Zacks Rank #2 (Buy).
Franco-Nevada has a projected earnings growth rate of 19.2% for the current year. The company’s shares have surged around 68% in a year. It currently has a Zacks Rank #2.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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