PPG Industries Inc. (PPG) announced that it would release its results for the second quarter of 2011 before the market opens on July 21, 2011.
PPG Industries posted a net income of $228 million or $1.40 per share in the first quarter of 2011 compared with $115 million or 69 cents in the year-ago quarter. The results surpassed the Zacks Consensus Estimate of $1.34 per share. In the upcoming quarter, the Zacks Consensus Estimate for PPG Industries is pegged at a profit of $2.01 per share, reflecting an annualized growth of 22.82% of Zacks Consensus
With respect to earnings surprises, the company outdid the Zacks Consensus Estimate in all the four trailing quarters. This is reflected in the average earnings surprise of 9.67%, with positive surprises in each of the quarters involved.
First Quarter Review
On April 21, 2011, PPG Industries announced its first-quarter 2011 results. PPG Industries posted net income of $228 million or $1.40 per share for the first quarter of 2011 compared with $115 million or 69 cents in the year-ago quarter. The result surpassed the Zacks Consensus Estimate of $1.34 per share.
Net sales for the quarter were $3.5 billion, up 13% from $3.1 billion in the first quarter of 2010. It also outperformed the Zacks Consensus Estimate of $3.3 billion. The company witnessed double digit percentage sales across all its major regions.
The increase was attributed to demand improvements, higher pricing in each of its coatings businesses, successful cost reduction initiatives and a gradual industrial recovery worldwide, partly offset by rising raw material costs and disappointing trends in the construction markets in the developed economies.
PPG Industries had cash and cash equivalents worth $796 million as of March 31, 2011, compared with $689 million as of March 31, 2010. Total debt was $3.99 billion as of March 31, 2011 compared with $3.05 billion as of March 31, 2010. Inventories at the end of the quarter amounted to $1.76 billion versus $1.59 billion as of March 31, 2010.
Agreement of Estimate Revisions
Out of the 7 analysts covering the stock for the second quarter of fiscal 2011, 1 analyst revised the stock upward in the last 30 days, while none of the analyst made any revision to the stock in the last 7 days. Similarly, for fiscal year 2011, out of the 8 analysts covering the stock, 1 analyst revised the stock upward in the last 30 days, while none of the analyst made any revision to the stock in the last 7 days.
Magnitude of Estimate Revisions
The second-quarter 2011 estimate was flat at $2.01 in the last 7 days, whereas it increased by 2 cents, from $1.99 to $2.01 in the last 30 days. Similarly, for the fiscal year 2011, earnings estimate was flat at $6.68 in the last 7 days, whereas it increased by 11 cents, from $6.57 to $6.68 in the last 30 days.
Our Take
PPG Industries witnessed double-digit percentage sales across all its major regions in the first quarter 2011, driven by demand improvements, higher pricing in each of its coating businesses, successful cost reduction initiatives and a gradual industrial recovery worldwide, partly offset by rising raw material costs and disappointing trends in the construction markets in the developed economies.
Looking ahead, the company anticipates further pricing gains in every segment, driving volume increase for PPG; an advantage that it expects to leverage into higher earnings through continued cost focus. PPG continues working on initiatives to deploy its cash to boost earnings.
The company will persistently apply its disciplined approach toward evaluating acquisitions, and expects to announce several small- to medium-sized bolt-on acquisitions over the next six to nine months.
The strong first-quarter performance along with a successful adoption of growth strategies and their meaningful implementation inspires confidence in the company. In addition, the macro economy and the concerned industry are also showing signs of recovery.
PPG faces stiff competition from the DuPont Performance Coatings segment of EI DuPont de Nemours & Co. (DD) and BASF Coatings AG.
The company retains a Zacks #2 Rank on its stock, which translates to short-term “Buy” recommendation.
