PPG Industries (PPG) recently delivered its 7th consecutive quarter of record earnings, prompting a flurry of positive estimate revisions from analysts.
It is a Zacks #1 Rank (Strong Buy) stock.
Based on current consensus estimates, analysts expect double-digit EPS growth from PPG over the next few years. On top of this, the company pays a dividend that yields a solid 2.3%. It has paid a remarkable 455 consecutive quarterly dividend payments.
Company Description
PPG Industries is a leading coatings and specialty products company. Sales for the first quarter of 2012 were divided as follows:
Performance Coatings: 31%
Industrial Coatings: 29%
Architectural Coatings – EMEA: 14%
Optical and Specialty Materials: 9%
Commodity Chemicals: 11%
Glass: 7%
The company was founded in 1883 and is headquartered in Pittsburgh. It has a market cap of $15.6 billion.
First Quarter Results
PPG Industries reported better than expected first quarter results on April 19. Earnings per share came in at $1.81, beating the Zacks Consensus Estimate of $1.79. It was a 29% increase over the same quarter in 2011.
Net sales rose 6% to $3.752 billion, ahead of the consensus of $3.696 billion. The Performance Coatings segment experienced a 9% increase in sales year-over-year while the Industrial Coatings segments saw a 5% increase.
Meanwhile, gross profit expanded from 39.8% of sales to 40.6% of net sales.
Estimates Rising
Following strong Q1 results, analysts revised their estimates significantly higher for both 2012 and 2013, sending the stock to a Zacks #1 Rank (Strong Buy).
The 2012 Zacks Consensus Estimate is now $7.99, up from $7.29 before the earnings release, and representing 18% growth over 2011 EPS. The 2013 consensus estimate is currently $8.86, corresponding with 11% growth.
Stable Dividend
PPG Industries also pays a dividend that yields a solid 2.3%. The company recently announced a 4% increase in its quarterly dividend to 59 cents per share. This also marks the company’s 455th consecutive dividend payment (going all the way back to 1899).
Since 2000, the company has increased its dividend at a compound annual rate of 3%:
Reasonable Valuation
Valuation looks very reasonable for PPG with shares trading at just 12.6x 12-month forward earnings, a discount to its 10-year median of 13.9x.
Its PEG ratio is 1.0 based on a consensus 5-year EPS growth rate of 12.2%.
The Bottom Line
With positive earnings momentum, strong growth, a stable 2.3% yield and reasonable valuation, PPG Industries offers investors attractive total return potential.
Todd Bunton is the Growth & Income Stock Strategist for Zacks Investment Research and Editor of the Income Plus Investor service.
