Earnings Scorecard: PPG Industries – Analyst Blog

PPG Industries (PPG) continued to experience a moderate recovery in several of the global end-use markets during the first quarter of 2010. This recovery combined with lower costs resulting from its restructuring initiatives positively impacted its financial results in the first quarter of 2010.

 

Taking non-recurring charges of $85 million or 52 cents per share, the Pittsburgh-based company reported a first quarter net income of $30 million or 18 cents. PPG recorded adjusted earnings of $117 million or 70 cents per share. Year over year, net earnings improved significantly from $32 million or 19 cents in the first quarter of 2009. Reported earnings were ahead of the Zacks Consensus Estimate of 63 cents for the first quarter of 2010.

 

PPG posted a 12% increase in top line to $3.1 billion in the first quarter. Higher year over year sales volumes were the most evident in the Industrial Coatings segment, which benefited from improving global automotive market and increasing general industrial applications.

 

PPG foresees similar improvements in industrial demand going into the second quarter although not much is expected in the construction market. The company has not provided any earnings guidance for the second quarter of 2010. However, the Zacks Consensus reflects an earnings estimate of $1.30 per share in the second quarter of 2010 and $4.14 per share for the full year 2010.

 

 

In the last 30-day period, out of the 11 analyst covering the stock, 8 provided upwardly revised estimates for the second quarter 2010, and of the 13 analysts providing estimates for the full year, 11 raised their estimates for 2010. Of the 12 analysts providing estimates for 2011, 7 increased their estimates for 2011.

 

 

In the same 30-day period, the Zacks Consensus Estimate for the second quarter moved upward from $1.23 per share earlier to $1.30, and for full-year 2010, the consensus moved from $3.93 to $4.14. For full year 2011, the estimate increased from $4.44 to $4.63.

 

 

PPG Industries is a major global supplier of protective and decorative coatings, with a leading position in several paints and coatings end markets. We like the company’s Optical business and the portfolio’s improved mix, higher growth and diminished cyclicality following the separation of auto glass.

 

However, the company’s sales and earnings remain cyclical and strongly linked with the US industrial production growth, which underscores its continued economic sensitivity. We are concerned about the late-cycle exposure in non-residential construction, aerospace coatings, marine coatings, and its overexposure to Europe, where recovery lags that in Asia and North America.

 

We thus prefer to remain Neutral on PPG Industries.