PPG Industries (PPG) Beats Q1 Earnings, Sales Estimates

PPG Industries Inc. (NYSE:PPG) reported adjusted earnings of $1.35 per share for the first quarter of 2017, up 6.3% from the year-ago figure. The result beat the Zacks Consensus Estimate of $1.31.

Adjusted earnings in the reported quarter exclude one-time items including after-tax pension settlement charges of $14 million or 5 cents per share.

Net sales in the quarter inched up 0.7% year over year to $3,569 million. Sales exceeded the Zacks Consensus Estimate of $3,533 million.

Unfavorable currency translation affected sales by 2%. The net effect of portfolio actions contributed less than 1% to total sales. Sales volume increased almost 2% year-over-year.

Segment Review

Performance Coatings: The segment recorded $2.02 billion in sales and income of $285 million in the reported quarter. Sales fell about 1% year over year. Currency translation reduced segment sales by about $45 million or 2%. Acquisition-related sales provided benefits of $10 million.

Segment income rose 2% year over year on the back of cost management initiatives, business-restructuring actions and selling-price increase. Automotive refinish coatings and architectural coatings – America and Asia Pacific sales declined by less than 1%, while the protective and marine coatings sales volumes declined by low-double-digit percentage.

Industrial Coatings: Sales at the segment were $1.47 billion, up almost 7% from the prior-year period. Total sales volume improved by almost 4%.

Net income for the segment was $273 million, up 3% year over year. The growth was largely driven by higher sales volume and lower manufacturing costs, which offset unfavorable currency translations.

Glass Segment: Sales were down 38% at $83 million, mainly due to the divestiture of the European fiber glass business. The company now operates only the North American fiber glass business, where volumes were down by low-single-digit percentage. The segment’s income was $9 million, down from $5 million in the prior-year quarter as a result of the absence of income from the divested European fiber glass business and Asian joint ventures.

Financial Position

PPG Industries ended the quarter with a cash balance of $1,349 million, up 48.4% year over year. Long-term debt fell 9.3% year over year to $3,817 million.

Outlook

PPG Industries expects a modest improvement in global growth, particularly in developed regions and continuing moderated growth rates in emerging regions.

PPG Industries repurchased shares worth $165 million in first quarter of 2017. With the repurchase in the quarter, the company reaffirmed its plans to deploy at least $2.5 billion to $3.5 billion of cash on acquisitions and share repurchases in 2017 and 2018 combined.

PPG Industries’ shares rallied almost 4.8% in the last three months, outperforming the Zacks categorized Chemicals-Diversified industry’s gain of about 3.7%.

Zacks Rank & Key Picks

PPG Industries currently carries a Zacks Rank #3 (Hold).

Better-ranked companies in the basic materials space include United States Steel Corporation (NYSE:X) , Kronos Worldwide Inc (NYSE:KRO) and Lundin Mining Corp. (OTC:LUNMF) . All the three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

U.S. Steel has an expected long-term earnings growth of 8%.

Kronos has an expected long-term earnings growth of 5%.

Lundin has an expected long-term earnings growth of 34.1%.

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