PPG Benefits From Cost and Pricing Actions, Acquisitions
PPG Industries Inc. PPG is well-placed to benefit from cost savings from restructuring actions. The company is also gaining from the synergies of acquisitions and pricing initiatives to counter raw material and logistics cost inflation.
The company’s shares have gained around 4.8% over the past year, compared with its industry’s decline of 6.6% over the same time frame.
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PPG Industries, a Zacks Rank #2 (Buy) stock, is implementing a cost-cutting and restructuring strategy, as well as optimizing its working capital requirements. The cost savings generated by these restructuring initiatives will be a tailwind for the company. PPG Industries has undertaken extensive restructuring efforts to reduce its cost structure, primarily focusing on regions and end markets with weak business conditions.
PPG Industries is on track to raise selling prices across its business segments to offset the impact of rising raw material costs. The company intends to completely recover the cost inflation experienced since 2021, with continued price hikes beginning in 2023. This is likely to strengthen its margins in 2023.
The company is also undertaking measures to grow business inorganically through value-creating acquisitions. Contributions from the acquisitions are expected to get reflected in its performance in 2023. Buyouts, including Tikkurila, Worwag and Cetelon, are likely to contribute to its top line this year.
PPG Industries also remains committed to boost shareholder returns with cash deployment. It has an impressive record of returning cash to shareholders through dividends and share buybacks. It has raised the annual dividend payout for 51 consecutive years. In 2022, the company returned around $570 million to shareholders through dividends and about $190 million through share repurchases.
PPG Industries recently raised its earnings guidance for the first quarter of 2023 factoring in higher volumes and prices. The company now sees adjusted earnings for the first quarter in the range of $1.52-$1.58 per share. It exceeds its previously announced outlook of $1.10-$1.20.
The company said that it witnessed an increased pace of recovery in its operating margin during the first quarter, which is attributed to higher sales volumes and improved selling prices. PPG's sales volume exceeded its guidance, with significant contributions from its aerospace and automotive original equipment manufacturer coatings businesses. PPG Industries also reported higher earnings in most of its business portfolio, including Europe, than the previous year.
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 Steel Dynamics, Inc. STLD, Olympic Steel, Inc. ZEUS and Linde plc LIN.
Steel Dynamics currently sports a Zacks Rank #1 (Strong Buy). The Zacks Consensus Estimate for STLD's current-year earnings has been revised 32.8% upward in the past 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.
Steel Dynamics’ earnings beat the Zacks Consensus Estimate in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 11.3%, on average. STLD has gained around 24% in a year.
Olympic Steel currently sports a Zacks Rank #1. The Zacks Consensus Estimate for ZEUS's current-year earnings has been revised 33.1% upward in the past 60 days.
Olympic Steel’s earnings beat the Zacks Consensus Estimate in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 26.2%, on average. ZEUS has rallied around 30% in a year.
Linde currently carries a Zacks Rank #2. The Zacks Consensus Estimate for LIN’s current-year earnings has been revised 2.5% upward in the past 60 days.
Linde beat Zacks Consensus Estimate in each of the last four quarters. It delivered a trailing four-quarter earnings surprise of 5.9% on average. LIN’s shares have gained roughly 12% in the past year.
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