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Why is PPG Industries (PPG) Down 4.8% Since Last Earnings Report?

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CAE (CAE) Misses Q1 Earnings and Revenue Estimates

CAE (CAE) delivered earnings and revenue surprises of -4.76% and -0.51%, respectively, for the quarter ended June 2018. Do the numbers hold clues to what lies ahead for the stock?

It has been about a month since the last earnings report for PPG Industries, Inc. PPG. Shares have lost about 4.8% in that time frame.

Will the recent negative trend continue leading up to its next earnings release, or is PPG due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

PPG Industries Misses Q1 Earnings Estimates, Sales Beat

PPG Industries reported net earnings from continuing operations of $347 million or $1.38 per share for first-quarter 2018, up roughly 6% from the year ago figure of $328 million or $1.27. However, adjusted earnings of $1.39 per share missed the Zacks Consensus Estimate of $1.41.
 
Net sales increased 9% year over year to $3,786 million, beating the Zacks Consensus Estimate of $3,730 million. Favorable currency swings positively impacted net sales by 6%.

Segment Review

Performance Coatings: The segment recorded $2.2 billion in sales and income of $285 million in the first quarter. Sales grew 7% year over year. Favorable currency translation increased segment sales by nearly 6%.
 
Segment income was in line with the year ago quarter as higher selling prices and lower operating costs were more than offset by increased raw material costs. Architectural coatings — America and Asia Pacific sales volumes increased by low single-digit clip year over year. Protective and marine coatings sales volumes were higher year over year.
 
Industrial Coatings: Sales at the segment were $1.6 billion, up roughly 10% from the prior-year period. Total sales volume rose by 1.5%. Acquisition-related sales provided benefits of $30 million.
 
Net income at the segment was $240 million, down 13% year over year as elevated raw material inflation more than offset higher selling prices. Favorable currency swings increased segment income by $10 million.

Financial Position
 
PPG Industries ended the quarter with cash and cash equivalents of $1,346 million, down 0.2% year over year. Long-term debt rose 36.2% year over year to $5,199 million.
 
Outlook
 
PPG Industries sees positive momentum in overall economic growth. The company is on track with its restructuring actions that are expected to provide cost savings between $50 million and $55 million in 2018, higher than what it had earlier expected. For 2018, PPG Industries anticipates corporate expenses to be between $175-$190 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There has been one revision higher for the current quarter compared to eight lower.

PPG Industries, Inc. Price and Consensus

 

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

VGM Scores

At this time, PPG has an average Growth Score of C, however its Momentum is doing a bit better with a B. The stock was also allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Based on our scores, the stock is more suitable for value and momentum investors than growth investors.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. It's no surprise PPG has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.


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