PPG Industries' (PPG) Q3 Earnings In Line, Revenues Miss

PPG Industries (NYSE:PPG) reported adjusted earnings of $1.56 per share for the third quarter of 2016, up 1.3% from the year-ago adjusted earnings of $1.54. The results were in line with the Zacks Consensus Estimate.

The company recorded a previously disclosed pension settlement charge of $616 million in the quarter. Including charges, net loss from continuing operations was $201 million or 75 cents per share in the reported quarter, versus a profit of $415 million or $1.52 per share a year ago.

Net sales in the quarter were up 1.7% year over year at $3,789 million. Sales, however, trailed the Zacks Consensus Estimate of $3,797 million.

Unfavorable currency translation affected sales by 2%. Acquisitions contributed over 2% to total sales. Sales volume increased 1.6% while selling price slightly declined year over year.

Segment Review

Performance Coatings: This segment recorded $2.22 billion in sales and income of $368 million. Sales at the segment fell less than 1% year over year. Currency translation reduced segment sales by about $45 million or 2%. Acquisition-related sales amounted to $15 million.

Higher sales volume augmented segment income but was offset by incremental spending related to growth. Automotive refinish coatings sales grew at a low single digit clip in constant currencies, while architectural coatings EMEA as well as protective and marine coatings sales volumes declined.

Industrial Coatings: Sales at the segment were $1.44 billion, up more than 6% from the prior-year period. Total sales volume grew by almost 4%, led by Asia-Pacific and Europe.

Net income for the segment was $249 million, up 3% year over year. The improvement was largely driven by growth in sales volume and continued lower costs from restructuring and manufacturing cost efficiencies as well as acquisition-related income.

Glass Segment: Sales were down 2% at $129 million. Improved sales volume was more than offset by unfavorable currency translation. The company now operates only the global fiber glass business. The flat glass business as well as the fiber glass joint ventures in Asia has been discontinued. The segment’s income was $12 million, up from $6 million in the prior-year quarter, due to cost management initiatives.

Financial Position

PPG Industries ended the quarter with a cash balance of $929 million, down 8.5% year over year. Long-term debt fell 11.4% year over year to $3,752 million.

PPG Industries repurchased shares worth $250 million in third-quarter 2016. Additionally, the company’s board authorized a $2 billion share repurchase program along with the current authorization of 2014, which had $520 million remaining as of Sep 30, 2016.

Outlook

PPG Industries expects a slight improvement in global demand and projects year-over-year earnings growth in fourth-quarter 2016 to be similar or modestly higher than that of the third quarter. It aims to reduce costs, particularly in the end-use markets, which are expected to be the weakest, in the fourth quarter. However, the company will continue with growth-related investments.

PPG Industries aims to boost shareholder returns with cash deployment in the fourth quarter. The company looks to deploy at least $650 million in the final quarter of 2016, which would place it at the top end of the previously announced deployment goal of $2−$2.5 billion over 2015−2016.

PPG INDS INC Price, Consensus and EPS Surprise

PPG INDS INC Price, Consensus and EPS Surprise | PPG INDS INC Quote

Zacks Rank

PPG Industries currently carries a Zack Rank #4 (Sell).

Some better-ranked companies in the diversified chemical space include The Chemours Company (NYSE:CC) , The Dow Chemical Company (NYSE:DOW) and Univar Inc. (NYSE:UNVR) .

Chemours Company has a long-term growth rate of 15.50% and sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Dow Chemical, with a Zacks Rank #2 (Buy), has a long-term growth rate of 7.50%.

Univar, with a Zacks Rank #2, has a long-term growth rate of 9.13%.

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