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PPG Industries (PPG) Q4 Earnings Beat, Sales Miss Estimates

Zacks Equity Research

PPG Industries Inc. PPG logged net income from continuing operations of $256 million or $1.07 per share for fourth-quarter 2018, up roughly 73% from the year-ago profit of $148 million or 58 cents.

Barring one-time items, adjusted earnings were $1.15 per share in the reported quarter, down around 3.4% from $1.19 a year ago. It, however, beat the Zacks Consensus Estimate of $1.09.

Net sales were down 1% year over year to $3,645 million. It missed the Zacks Consensus Estimate of $3,659 million. Unfavorable currency swings affected net sales by around 3%. The company recorded net sales growth in constant currencies of about 2% on a year-over-year basis, supported by a rise in selling prices of more than 2%.

FY18 Results

For 2018, the company posted profits from continuing operations of $1,323 million or $5.40 per share, down from $1,369 or $5.31 in 2017. Adjusted earnings for the year came in at $5.92 per share, up 1% from $5.86 a year ago.
 
PPG Industries reported revenues of $15,374 million in 2018, up around 4.2% from $14,748 million in 2017.Favorable foreign currency translation positively impacted sales by less than 1%. Organic sales growth was about 3%.

PPG Industries, Inc. Price, Consensus and EPS Surprise

 

PPG Industries, Inc. Price, Consensus and EPS Surprise | PPG Industries, Inc. Quote

Segment Highlights

Performance Coatings: The segment recorded $2,140 million in sales in the reported quarter, up nearly 1% year over year. Sales rose more than 3% in constant currencies on higher selling prices. Unfavorable foreign currency translation affected net sales by roughly 3%.

Segment income rose $2 million year over year to $261 million aided by higher selling prices and cost management, offset by raw material and logistics cost inflation as well as impact of lower sales volumes.

Industrial Coatings: Sales at the segment totaled $1,505 million, down roughly 3.4% from the prior-year period. Unfavorable foreign currency translation lowered sales by more than 3% year over year.

Net income at the segment was $187 million, down 13% year over year as raw material, logistics cost inflation and softening of global automotive OEM industry production rate were partly offset by aggressive cost management and better selling prices.

Financial Position

PPG Industries ended the quarter with cash and cash equivalents of $902 million, down around 37% year over year. Long-term debt rose around 5.6% year over year to $4,365 million.

PPG Industries had $1.8 billion remaining under its current share repurchase authorization at the end of 2018.

Outlook

Moving ahead, PPG Industries expects impact of cost inflation, year-over-year unfavorable foreign currency translation and lower sales volume to impact its performance in the first half of 2019. Based on these, the company projects first-quarter 2019 earnings per share in the range of $1.18-$1.23.
 
The company also envisions sales growth of 3-5% at constant currency for full-year 2019. It also expects adjusted earnings per share growth of 7-10% for the year. The company expects to deliver at least $70 million in cost savings in 2019.

Price Performance

PPG Industries has outperformed the industry over the past year. The company’s shares have moved down around 13.4% compared with roughly 26.9% decline of the industry.

 


Zacks Rank & Stocks to Consider

PPG Industries currently carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the basic materials space are Ingevity Corporation NGVT, Israel Chemicals Ltd. ICL and Cameco Corporation CCJ.

Ingevity’s shares have gained 19% in the past year. The company has an expected earnings growth rate of 21.5% for 2019 and it currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Israel Chemicals has an expected earnings growth rate of 2.7% for 2019 and a Zacks Rank #2 (Buy). The stock has rallied 30.4% in a year.

Cameco has an expected earnings growth rate of 20% for 2019 and a Zacks Rank #2. Its shares have gained 28.5% in a year.

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