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What's in the Cards for PPG Industries (PPG) in Q1 Earnings?

Zacks Equity Research
·4 mins read

PPG Industries Inc. PPG is set to release first-quarter 2020 results after the closing bell on Apr 27. The paint giant’s results will likely reflect the benefits of its cost-control initiatives and pricing actions. However, unfavorable impacts of weak industrial demand and currency headwind are likely to have affected its performance.

PPG Industries beat the Zacks Consensus Estimate for earnings in three of the trailing four quarters while missed once, the average positive surprise being roughly 4%. The company posted a negative earnings surprise of around 3% in the last reported quarter.

Shares of company are down 24.9% over the past year, compared with its industry’s 39.9% decline.


 

Let’s see how things are shaping up for this announcement.

What do the Estimates Say?

PPG Industries expects first-quarter earnings per share from continuing operations in the range of $1.32-$1.42.

The Zacks Consensus Estimate for revenues for PPG Industries for the to-be-reported quarter stands at $3,453 million, suggesting an expected year-over-year decline of 4.7%.

The Zacks Consensus Estimate for revenues for the company’s Industrial Coatings unit is currently pegged at $1,497 million, calling for a decline of around 1.3% year over year. The consensus mark for revenues for the Performance Coatings segment is pegged at $2,129 million, indicating a roughly 1% year-over-year rise.

Factors at Play

Headwinds from weak industrial demand amid the outbreak of coronavirus are likely to have negatively impacted first-quarter sales volumes in the Industrial Coatings segment. The company faces challenges from sluggish global industrial activities, especially in the United States and Europe. It is also seeing lower global automotive OEM industry production activities, which is hurting its volumes.

Currency translation headwinds are also likely to have exerted pressure on the company’s sales and margins in the first quarter. PPG Industries expects unfavorable currency translation impact of $15-$40 million on net sales in the first quarter.

Nevertheless, PPG Industries is aggressively managing costs and is also implementing appropriate pricing actions. It remains focused on improving its cost structure and recovering margins through price increases amid an inflationary environment. Benefits of these initiatives might reflect on the company’s bottom line in the first quarter. PPG Industries expects $17-$20 million in cost savings in the first quarter.

The company is also taking steps to grow business inorganically through value-creating acquisitions. Strategic buyouts (including Whitford Worldwide and Hemmelrath) that were completed last year are likely to have contributed to its sales in the March quarter.  
 

PPG Industries, Inc. Price and EPS Surprise

 

PPG Industries, Inc. Price and EPS Surprise
PPG Industries, Inc. Price and EPS Surprise

PPG Industries, Inc. price-eps-surprise | PPG Industries, Inc. Quote

 

Zacks Model

Our proven model does not conclusively predict an earnings beat for PPG Industries this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. But that’s not the case here.

Earnings ESP: Earnings ESP for PPG Industries is -1.84%. This is because the Most Accurate Estimate is currently pegged at $1.20 while the Zacks Consensus Estimate stands at $1.22. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
 
Zacks Rank: PPG Industries carries a Zacks Rank #3.  

Stocks Poised to Beat Estimates

Here are some companies in the basic materials space you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:

Verso Corporation VRS, expected to release earnings on May 13, has an Earnings ESP of +20% and carries a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Barrick Gold Corporation GOLD, scheduled to release earnings on May 6, has an Earnings ESP of +2.42% and carries a Zacks Rank #2.

Pretium Resources Inc. PVG, expected to release earnings on May 7, has an Earnings ESP of +25.81% and carries a Zacks Rank #2.

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Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

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PPG Industries, Inc. (PPG) : Free Stock Analysis Report
 
Pretium Resources, Inc. (PVG) : Free Stock Analysis Report
 
Barrick Gold Corporation (GOLD) : Free Stock Analysis Report
 
Verso Corporation (VRS) : Free Stock Analysis Report
 
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Zacks Investment Research