PPG's 4Q EPS Meets, Profit Up


Coatings giant PPG Industries Inc (PPG) met earnings expectations in the fourth quarter of 2012 while continued momentum across automotive OEM and aerospace markets helped it to post better-than-expected sales in the quarter.

The company posted earnings of $1.53 a share in the fourth quarter, excluding one-time charges, which matched the Zacks Consensus Estimate. The adjusted earnings exclude charges (of $11 million) associated with acquisitions and the spin off of the company’s commodity chemicals business to Georgia Gulf Corp. (GGC) for $2.1 billion.

Profit (as reported) rose roughly 5% year over year to $227 million or $1.46 a share, aided by the savings from the Pennsylvania-based company’s cost containment and restructuring measures.

For full-year 2012, profit fell 14% year over year to $941 million or $6.06 per share. Adjusted earnings for the year were $7.94 per share, just ahead of the Zacks Consensus Estimate of $7.93.

Separately, the company said that it is in talks with Essilor International regarding the future of their joint venture, Transitions Optical. PPG Industries holds a 51% stake in the joint venture with Essilor owning the balance. The company hinted that the ongoing discussions may lead to a structural change in the joint venture or possible stake sale.  

Shares of PPG Industries, which gained 59% last year, fell 1.5% in pre-market trading.


Revenues rose 3.7% year over year to $3,648 million, beating the Zacks Consensus Estimate of $3,589 million. PPG Industries saw growth across all business segments except the Glass division in the quarter.

Unfavorable currency exchange translation weighed on sales. The company’s North American automotive OEM coatings business recorded strong growth in the quarter.

Revenues for the full year were $15,200 million, up 2% year over year, beating the Zacks Consensus Estimate of $15,143 million.

Segment Analysis

Revenues from the Performance Coatings division edged up 1% year over year to $1.2 billion in the fourth quarter. Strength across aerospace, automotive refinish and architectural coatings markets aided the division’s sales. Acquisitions provided marginal benefit.

Industrial Coatings segment sales jumped 9% year over year to $1.1 billion driven by strong volume growth in the automotive OEM coatings business. Weakness in Europe was more than offset by volume gains across North America and emerging markets. Demand in the industrial coatings business was mixed in the quarter.

Revenues from the Architectural Coatings (Europe, Middle East and Africa) division rose 4% to $465 million as contributions of Dyrup acquisition and better pricing more than offset unfavorable currency exchange impact and lower sales volume.

Optical and Specialty Materials sales rose 5% to $272 million in the quarter as gain in optical products led to higher volumes. The division benefited from customer inventory build-ups associated with the February 2013 launch of Generation VII TRANSITIONS lenses.

Revenues from the Commodity Chemicals segment inched up 2% to $405 million on account of higher caustic pricing and improved volume.

Sales from the Glass segment, however, slipped 6% to $241 million as lower fiber glass volume and pricing offset an increase in flat glass sales.

Balance Sheet

The company exited 2012 with cash and cash equivalents and short-term investments of roughly $2.4 billion, up 60% year over year. Total debt increased 9% year over year to around $4 billion. Operating cash flow for the year was roughly $1.8 billion, up 25% year over year.

Acquisition/Spin off

The company, in July 2012, agreed to split its commodity chemicals unit and merge it with Georgia Gulf. The deal value of roughly $2.1 billion includes $95 million of debt. The transaction is expected to consummate in late January 2013. PPG Industries expects to incur additional charges associated with the deal in first-quarter 2013.

Moreover, the company, in December 2012, struck a deal with AkzoNobel, N.V., to buy the latter’s North American architectural coatings business for $1.05 billion. The transaction is expected to close in second-quarter 2013.

Outlook and Recommendation

Moving ahead, the company envisions mixed economic trends in 2013 with continued strong growth in North America, improvements in Asia and persistent weakness in Europe.  It will continue to execute restructuring measures, which are expected to fetch cost savings of $70 million-$80 million this year. Moreover, the company will continue to implement the appropriate pricing strategy to offset higher input costs.

PPG Industries has a diversified base of products and markets, and looks to grow its businesses strategically along with controlling costs. However, the European market is expected to remain under pressure and raw material inflation and currency headwinds remains concerns for the company.

PPG Industries, which competes with DuPont Performance Coatings segment of DuPont (DD), retains a short-term Zacks Rank #3 (Hold). Currently, we have a long-term Neutral recommendation on the stock.

Read the Full Research Report on PPG

Read the Full Research Report on DD

Read the Full Research Report on GGC

Zacks Investment Research

More From Zacks.com


View Comments (0)

Recommended for You

  • Tycoon buys 30 Rolls-Royces for Macau hotel

    A Hong Kong tycoon has placed the biggest ever order for Rolls-Royce cars, agreeing to buy 30 Phantoms to chauffeur guests at a luxury resort he's building in the global gambling capital of Macau. Stephen Hung's $20 million purchase surpasses the 14 Phantoms bought by Hong Kong's Peninsula Hotel in…

    Associated Press
  • Enjoy this refreshing Triple Play offer!

    Get FIOS TV Mundo starting at $79.99/mo. w/ no annual contract + 2-yr. price guarantee. Or sign for 2 yrs. & get a $300 prepaid Visa. Click here.

    AdChoicesVerizon FiOS ®Sponsored
  • Tycoon's arrest sends shock wave through Russia

    Tycoon's arrest sends shock wave through Russia MOSCOW (AP) — The arrest of a Russian telecoms and oil tycoon has sent shock waves through the country's business community, with some fearing a return to the dark days of a decade ago, when the Kremlin asserted its power by imprisoning the country's…

    Associated Press
  • Before You Buy Alibaba, Check Out 4 Top China Stocks

    Before You Buy Alibaba, Check Out 4 Top China Stocks While investors gear up for Alibaba Group 's (BABA) hotly anticipated initial public offering, don't forget about other Chinese stocks that are worth keeping an eye on. Today's Young Guns Screen of

    Investor's Business Daily
  • Costco Stores in Canada to Stop Taking American Express

    “The credit card relationship between American Express and Costco Wholesale Canada will not be renewed when it expires” on Dec. 31, the company said today in an e-mail to Canadian customers. The message was attributed to Lorelle Gilpin, vice president of marketing and membership for Costco…

  • "The Retiree Next Door": How successful retirees stretch their savings

    "The Retiree Next Door": How successful retirees stretch their savingsBy the time she hit her late 40s, Toni Eugenia wasn’t sure she would ever be able to retire. Eugenia, 56, a pharmacy technician who lived in Houston, was nearly $200,000 in debt and

    Yahoo Finance
  • As Fed takes baby steps, Cramer's trick for profit

    In turn, Cramer says making money in the market, involves looking at the environment through the lens of the Fed. "The trick is to remember that they speak for the common person," Cramer said. "The Fed wants the common person to make money." With that backdrop always in mind, Cramer says it becomes…

  • CNBC Anchor Calls Out Fed-Hater Bill Fleckenstein In Startling Shouting Match

    CNBC Bill Fleckenstein of Fleckenstein Capital appeared on CNBC's Futures Now program on Tuesday. Futures Now host Jackie DeAngelis came out swinging, asking Fleckenstein right at the top if he was willing to admit that he had misunderstood monetary policy. Sounding taken aback, Fleckenstein…

    Business Insider
  • 1 Tip To Lose Belly Fat

    It's Hollywood's Hottest Diet And Gets Rid Of Stubborn Fat Areas Like Nothing Else.

  • Beanie Babies creator's sentence debated in court

    Beanie Babies creator's sentence debated in court CHICAGO (AP) — Federal prosecutors seeking to put the billionaire creator of Beanie Babies in prison for hiding millions in Swiss bank accounts told appellate court judges Wednesday that the toymaker's sentence of probation threatens to erode the…

    Associated Press
  • Apple to unveil new iPads, operating system on Oct. 21 : report

    The company plans to unveil the sixth generation of its iPad and the third edition of the iPad mini, as well as its operating system OS X Yosemite, which has undergone a complete visual overhaul, the Internet news website said. Trudy Muller, a spokeswoman for Apple, declined to comment. The iPad is…

  • Play

    Citi, Bank of America Offer Discounted Mortgages

    Citigroup and Bank of America will offer mortgages at discounted interest rates to help borrowers with low incomes or subprime credit. AnnaMaria Andriotis joins MoneyBeat. Photo: Getty.

    WSJ Live
  • Gilead Stock Is Falling On These Drug Setbacks

    Gilead Stock Is Falling On These Drug Setbacks Gilead Sciences (GILD) shares are backsliding Wednesday on news that the patient drop-out rate for hepatitis C drug Sovaldi is quadruple that of clinical trials. In addition, the biotech's Phase 2 study results

    Investor's Business Daily
  • Margaritaville casino owners seek bankruptcy

    The owner of Biloxi's Margaritaville casino has filed for Chapter 11 bankruptcy protection Tuesday, only hours before a hearing where the landlord aimed to seize the property. The filing by MVB Holding LLC in U.S. Don Dornan, a lawyer for landlord Clay Point LLC, said the company had planned to ask…

    Associated Press
  • Here's What Mark Cuban Wishes He Knew About Money In His 20s

    Cuban is the owner of the Dallas Mavericks basketball team. Billionaire investor and entrepreneur Mark Cuban is generous with his advice. When we asked him what he wishes he'd known about money in his 20s, he said:

    Business Insider
  • Accomplish your career goals

    At Capella University, you can learn the skills you need to succeed. Why wait another day? Get started today.

    AdChoicesCapella UniversitySponsored
  • Embraer to sell 50 E-175 jets to Republic in $2.1 billion deal

    Brazil's Embraer SA, the world's third largest commercial planemaker, said on Wednesday it booked a firm order from U.S. The deal, which will be included in Embraer's order book for the third quarter, is valued at $2.1 billion, the planemaker said in a securities filing. The planes will be operated…

  • SHOE COMPANY: Our CEO Just Disappeared And Most Of The Money Is Gone

    "and like that: he's gone." This is an actual headline from a company press release: "CEO and COO disappeared, most of the company's cash missing." (Via FastFT) In a statement, German-based shoe company Ultrasonic said its CFO,  Chi Kwong Clifford Chan, has been unable to reach the company's CEO,…

    Business Insider
  • Don't buy Alibaba stock: 'Dean of Valuation'

    Investors should steer clear of Alibaba , valuation expert Aswath Damodaran said Wednesday. On CNBC's " Fast Money ," Damodaran, a professor of finance at New York University's Stern School of Business, noted that he was looking at Alibaba stock from the perspective of a long-term investor, not a…

  • Play

    What the Fed Meeting Means for Bonds

    Janet Yellen & Co. are expected to hint at their timetable for raising interest rates. Here's how investors should prepare ahead of the meeting.

    WSJ Live
  • Billionaire Investor Says Chinese People Work Harder And Western Companies Could Face Deep Trouble After Alibaba IPO

    Michael Moritz, the chairman of VC firm Sequoia Capital, is a huge fan of Chinese internet companies and reiterated his enthusiasm for the Chinese market in an interview with The Wall Street Journal Wednesday. The billionaire investor described the Alibaba IPO as a “major landmark event” that is as…

    Business Insider
  • Top Analyst Upgrades and Downgrades: AEP, BHP, GE, Incyte, 3M, Tyco, Under Armour and More

    Top Analyst Upgrades and Downgrades: AEP, BHP, GE, Incyte, 3M, Tyco, Under Armour and More Stocks were firm on Wednesday morning ahead of the FOMC meeting outcome. Tuesday’s rally may have sparked higher interest again, and investors are looking for bargains

    24/7 Wall St.
  • 6 Things Debt Collectors Wish You Knew

    The work debt collectors do is not popular, and has become increasingly derided by those who don’t like what we do or simply don’t know the facts about debt collection. Too often, debt collection is painted with a broad brush to create a portrait that isn’t accurate, and doesn’t properly educate…