PPG Industries (PPG) Stock Up 12% in 3 Months: Here's Why
PPG Industries Inc.’s PPG shares have popped 12% over the past three months. The company has also outperformed its industry’s rise of 6.7% over the same time frame. It has also topped the S&P 500’s roughly 11.3% rise over the same period.
Let’s take a look into the factors behind the stock’s price appreciation.
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Pricing & Cost Actions Drive PPG
PPG Industries, a Zacks Rank #3 (Hold) stock, is benefiting from higher pricing across its segments, manufacturing efficiencies, cost discipline and efforts to grow its business through acquisitions amid headwinds from demand weakness in Europe and China.
The company 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 act as 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. The company expects to deliver incremental restructuring savings of roughly $10-$15 million in second-quarter 2023.
PPG Industries is also raising selling prices across its business segments to offset the impact of cost inflation in raw materials, energy and logistics. The company witnessed a significant increase in its profits in the first quarter driven by pricing growth across segments, improved manufacturing efficiencies and overall cost discipline. Pricing measures are likely to continue to support its margins in the remainder of 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. Acquisitions, 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. It also paid dividends worth around $145 million in the first quarter.
Estimates Going Up
Over the past two months, the Zacks Consensus Estimate for PPG for second-quarter 2023 has increased around 8.7%. The consensus estimate for 2023 has also been revised 4.9% upward over the same time frame. The favorable estimate revisions instill investor confidence in the stock.
PPG Industries, Inc. Price and Consensus
PPG Industries, Inc. price-consensus-chart | PPG Industries, Inc. Quote
Stocks to Consider
Better-ranked stocks worth considering in the basic materials space include L.B. Foster Company FSTR, Gold Fields Limited GFI, and Linde plc LIN.
L.B. Foster currently carries a Zacks Rank #1 (Strong Buy). The Zacks Consensus Estimate for FSTR's current-year earnings has been stable over the past 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.
L.B. Foster’s earnings beat the Zacks Consensus Estimate in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 140.5%, on average. FSTR has gained around 10% in a year.
Gold Fields currently carries a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for GFI’s current-year earnings has been revised 4% upward in the past 60 days.
The consensus estimate for current-year earnings for GFI is currently pegged at $1.05, reflecting an expected year-over-year growth of 8.3%. Gold Fields’ shares have popped roughly 66% in the past year.
Linde currently carries a Zacks Rank #2. The Zacks Consensus Estimate for LIN’s current-year earnings has been revised 4.4% 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 6.9% on average. LIN’s shares have gained roughly 20% in the past year.
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PPG Industries, Inc. (PPG) : Free Stock Analysis Report
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Linde PLC (LIN) : Free Stock Analysis Report
