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What Makes PPG Industries (PPG) a Solid Investment Option Now?

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·5 min read
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PPG Industries Inc.’s PPG stock looks promising at the moment. The company’s shares have popped 21.8% over the past three months, outperforming the 13.6% growth of its industry. The price rally is partly driven by the company’s upbeat earnings guidance for the third quarter.

We are positive on the company’s prospects and believe that the time is right for you to add the stock to the portfolio as it looks promising and is poised to carry the momentum ahead.


 

PPG Industries currently has a Zacks Rank #1 (Strong Buy) and a VGM Score of B. Our research shows that stocks with a VGM Score of A or B, combined with a Zacks Rank #1 or 2 (Buy), offer the best investment opportunities for investors.

Let’s delve deeper into the factors that make this paints giant an attractive choice for investors right now.

Upbeat Outlook

PPG Industries recently said that it expects adjusted earnings per share for the third quarter in the band of $1.90-$1.94, up from $1.67 it recorded a year ago. The company also noted that it now expects sales volumes for the third quarter to be down around 5% year over year, below the bottom-end of its earlier communicated guidance range of down 6-11%.

Per the company, third-quarter results reflect strong year-over-year sales volume growth in global architectural coatings businesses. Also, improving demand in several end-use markets led to higher sales volumes along with aggressive cost-management actions that led to better-than-expected third-quarter financial results.

The company also expects to achieve high-teen percentage operating margins in both its reporting segments in the third quarter. It is witnessing strong performance in aggregated global architectural coatings and packaging coatings businesses along with strengthening demand in general industrial coatings and automotive original equipment manufacturer.

Estimates Northbound

Earnings estimate revisions have the greatest impact on stock prices. Over the past two months, the Zacks Consensus Estimate for PPG Industries for the current year has increased around 5.3%. The consensus estimate for 2021 has also been revised 4.3% upward over the same time frame.

Cash Deployment

PPG Industries remains committed to boost returns to shareholders leveraging strong cash flows. In July 2020, it raised its quarterly dividend by 6% to 54 cents per share. Notably, PPG Industries has raised its annual dividend payout for 49th straight year. The company paid dividend worth $120 million in the second quarter. It generated around $500 million of cash from operations during the quarter.

Cost Actions to Drive Margins

PPG Industries is actively managing costs amid a challenging environment due to the coronavirus pandemic. It achieved an interim cost savings of roughly $170 million in the second quarter from its cost mitigation actions. Moreover, the company achieved more than $20 million in cost savings from its restructuring programs in the second quarter. PPG Industries also expects incremental restructuring savings of $30-$35 million in the third quarter.

The company, in June, also approved substantial restructuring actions to lower its global cost structure. The plan includes a voluntary separation program that was offered in the United States and Canada. Upon completion, PPG Industries anticipates the planned actions to offer $160-$170 million in annual pre-tax cost savings.

Acquisitions to Boost Sales

PPG Industries is taking steps to grow business inorganically through strategic acquisitions. The acquisition of specialty materials maker, Dexmet Corporation, has allowed the company to add value to its customers by enhancing product offerings as well as expanding R&D capabilities.

Moreover, the purchase of Industria Chimica Reggiana 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 top line this year.

PPG Industries, Inc. Price and Consensus

 

PPG Industries, Inc. Price and Consensus
PPG Industries, Inc. Price and Consensus

PPG Industries, Inc. price-consensus-chart | PPG Industries, Inc. Quote

Stocks to Consider

Other top-ranked stocks worth considering in the basic materials space include Agnico Eagle Mines Limited AEM, Eldorado Gold Corporation EGO and Yamana Gold Inc. AUY.

Agnico Eagle has a projected earnings growth rate of 104.1% for the current year. The company’s shares have rallied around 57% in a year. It currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Eldorado Gold has a projected earnings growth rate of 2,450% for the current year. The company’s shares have shot up roughly 77% in a year. It currently carries a Zacks Rank #1.

Yamana Gold has an expected earnings growth rate of 92.3% for the current year. The company’s shares have surged around 88% in the past year. It currently carries a Zacks Rank #2.

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PPG Industries, Inc. (PPG) : Free Stock Analysis Report
 
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