A month has gone by since the last earnings report for PPG Industries (NYSE:PPG). Shares have added about 1.6% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is PPG Industries due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
PPG Industries’ Q4 Earnings Beat, Sales Miss Estimates
PPG Industries logged net income from continuing operations of $256 million or $1.07 per share for fourth-quarter 2018, up roughly 73% from the year-ago profit of $148 million or 58 cents.
Barring one-time items, adjusted earnings were $1.15 per share in the reported quarter, down around 3.4% from $1.19 a year ago. It, however, beat the Zacks Consensus Estimate of $1.09.
Net sales were down 1% year over year to $3,645 million. It missed the Zacks Consensus Estimate of $3,659 million. Unfavorable currency swings affected net sales by around 3%. The company recorded net sales growth in constant currencies of about 2% on a year-over-year basis, supported by a rise in selling prices of more than 2%.
FY18 Results
For 2018, the company posted profits from continuing operations of $1,323 million or $5.40 per share, down from $1,369 or $5.31 in 2017. Adjusted earnings for the year came in at $5.92 per share, up 1% from $5.86 a year ago.
PPG Industries reported revenues of $15,374 million in 2018, up around 4.2% from $14,748 million in 2017.Favorable foreign currency translation positively impacted sales by less than 1%. Organic sales growth was about 3%.
Segment Highlights
Performance Coatings: The segment recorded $2,140 million in sales in the reported quarter, up nearly 1% year over year. Sales rose more than 3% in constant currencies on higher selling prices. Unfavorable foreign currency translation affected net sales by roughly 3%.
Segment income rose $2 million year over year to $261 million aided by higher selling prices and cost management, offset by raw material and logistics cost inflation as well as impact of lower sales volumes.
Industrial Coatings: Sales at the segment totaled $1,505 million, down roughly 3.4% from the prior-year period. Unfavorable foreign currency translation lowered sales by more than 3% year over year.
Net income at the segment was $187 million, down 13% year over year as raw material, logistics cost inflation and softening of global automotive OEM industry production rate were partly offset by aggressive cost management and better selling prices.
Financial Position
PPG Industries ended the quarter with cash and cash equivalents of $902 million, down around 37% year over year. Long-term debt rose around 5.6% year over year to $4,365 million.
PPG Industries had $1.8 billion remaining under its current share repurchase authorization at the end of 2018.
Outlook
Moving ahead, PPG Industries expects impact of cost inflation, year-over-year unfavorable foreign currency translation and lower sales volume to impact its performance in the first half of 2019. Based on these, the company projects first-quarter 2019 earnings per share in the range of $1.18-$1.23.
The company also envisions sales growth of 3-5% at constant currency for full-year 2019. It also expects adjusted earnings per share growth of 7-10% for the year. The company expects to deliver at least $70 million in cost savings in 2019.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -10.95% due to these changes.
VGM Scores
At this time, PPG Industries has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, PPG Industries has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
PPG Industries, Inc. (PPG): Free Stock Analysis Report
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