Shares of PPG Industries Inc. (PPG) hit a new 52-week high of $190.07 on Dec 31 and eventually closed at $189.66.
Year-to-date, PPG Industries’ share price recorded a healthy return of 42.30%. The company’s long-term estimated earnings per share (EPS) growth rate is 8.5%. PPG Industries’ average volume of shares traded over the last three months was approximately 755K.
What is Driving PPG industries Up?
PPG Industries outshone earnings expectations in the third quarter of 2013 on the back of improving demand trends across major markets, cost reduction measures and continued strong performance of its coatings business. Strength across aerospace and automotive original equipment manufacturer (:OEM) coatings supported the results.
Excluding one-time items, the company posted earnings from continuing operations of $2.44 a share in the quarter, surpassing the Zacks Consensus Estimate of $2.34. The adjusted earnings exclude one-time items including restructuring and acquisition charges.
Revenues climbed roughly 17% year over year to $3,980 million, outpacing the Zacks Consensus Estimate of $3,960 million. Healthy results in the coatings business was fueled by gains across automotive OEM coatings, automotive refinish and aerospace.
PPG Industries, which currently carries a Zacks Rank #2 (Buy), has an aggressive cost cutting and restructuring strategy. Cost savings from these restructuring efforts will act as a positive catalyst for the company. PPG Industries expects its European restructuring program to fetch cost savings of $70 million to $80 million in 2013.
Separately, the company’s board, in July 2013, approved a new $102 million restructuring program focused on achieving cost synergies associated with the North American architectural coatings business takeover. The restructuring program will also include actions for businesses grappling with challenging market conditions, especially protective and marine coatings and certain European businesses such as architectural coatings and fiber glass.
PPG Industries also has an impressive record of returning cash to shareholders through dividends and share buybacks. The company has a rich history of raising dividends.
PPG Industries expects recovery across its end markets to continue. Majority of economic sectors in North America, one of its largest regions, are expected to exhibit improvement due to increasing industrial and chemical production activity. The company is seeing strength in the North American automotive OEM and aerospace markets.
PPG Industries is also taking several initiatives to grow its business inorganically. PPG Industries, in April 2013, closed the acquisition of the North American architectural coatings business of Dutch paints company AkzoNobel, N.V. (AKZOY) for $1.05 billion. This marked the second-largest acquisition in the company’s history. The company expects to achieve $200 million in annual synergies from the buyout within the first three full years. Moreover, in an effort to strengthen its position in the aerospace industry, PPG Industries has acquired specific assets of privately-held specialty coatings company Deft Inc.
Other Stocks to Consider
Other players in the chemical industry worth considering are Johnson Matthey plc (JMPLY) and Innospec Inc. (IOSP). While Johnson Matthey holds a Zacks Rank #1 (Strong Buy), Innospec retains a Zacks Rank #2 (Buy).