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Why You Should Keep PPG Industries (PPG) in Your Portfolio

Zacks Equity Research

PPG Industries Inc. PPG is poised to gain from its cost management initiatives, pricing actions and strategic acquisitions amid headwinds including soft industrial demand and raw materials cost inflation.

Shares of the paints giant are up 14.1% so far this year, outperforming its industry’s 22.2% decline.


Let’s delve deeper to find out why this Zacks Rank #3 (Hold) stock is worth retaining at the moment.

What’s Favoring the Stock?

PPG Industries is aggressively managing costs and is also implementing appropriate pricing hike actions. The company remains focused on improving its cost structure and recovering margins through price increases amid an inflationary environment.

PPG Industries’ cost savings programs delivered around $20 million in savings in the second quarter of 2019. The company expects to achieve another $20 million in cost savings in the third quarter. PPG Industries has also started implementing a new cost-savings program, which targets full-year run-rate savings of roughly $125 million once completed.

The company is also undertaking steps to grow business inorganically. The company, earlier this year, completed the acquisitions of Whitford Worldwide and Hemmelrath. It expects these two along with the SEM Products acquisition to add around $400 million in annualized revenues.

PPG Industries also remains committed in its cash deployment with a focus on shareholder value creation over the long term. The company, in July, raised its quarterly dividend by 6% to 51 cents per share.

A Few Headwinds

PPG Industries faces challenges from sluggish global industrial activities. It witnessed weaker industrial production across several key regions through the first half of 2019. Headwinds from soft industrial demand are likely to negatively impact its volumes. PPG Industries expects industry demand for several of its businesses to remain sluggish in the third quarter.

Moreover, the company faces some headwind from unfavorable currency translation. Currency swings reduced its sales by more than 3% or around $130 million in the second quarter. The company expects unfavorable currency impact of $30-$50 million on sales in the third quarter.

PPG Industries is also exposed to cost pressure associated with raw materials. It witnessed inflationary impacts through the first half. Some input cost pressure will likely to continue in the third quarter, albeit to a lesser extent than what was witnessed during the first half.

PPG Industries, Inc. Price and Consensus


PPG Industries, Inc. Price and Consensus

PPG Industries, Inc. price-consensus-chart | PPG Industries, Inc. Quote

Stocks Worth Considering

A few better-ranked stocks worth a look in the basic materials space include Arconic Inc ARNC, Kinross Gold Corporation KGC and Alamos Gold Inc. AGI.

Arconic has an estimated earnings growth rate of 50% for the current year and sports a Zacks Rank #1 (Strong Buy). Its shares have moved up 21% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.

Kinross has projected earnings growth rate of 160% for the current year and carries a Zacks Rank #1. The company’s shares have surged around 89% in a year’s time.

Alamos Gold has estimated earnings growth rate of 320% for the current year and carries a Zacks Rank #2 (Buy). The company’s shares have rallied roughly 42% in a year’s time.

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