PPG 042312
PPG Industries (PPG)
Even with the weakness in Europe, the coatings giant PPG is still seeing strong growth in the U.S. and other emerging markets, propelling it to new 52 week highs. A majority of PPG’s business is derived from OEM automotive coatings and coating innovations since 1924. Being that auto and truck sales have been relatively strong in recent months and the trends seem to be improving PPG may stand to benefit further from increased production of not just autos, but all types of manufacturing that requires their coatings. They may be the automotive derivative trade you haven’t thought of.
PPG was recently featured in our Investment Ideas column for its healthy dividend yield and stable growth.
Company Description & Developments
Headquartered in Pittsburgh, Pa., PPG Industries is a leading diversified global manufacturer of paints, coatings, optical products specialty materials and chemicals as well as glass and fiber glass. They cater to a full spectrum of customers in industrial, transportation, consumer products and construction markets.
PPG has more than 140 manufacturing facilities and equity affiliates that span more than 60 countries around the world. On April 19th the coatings company reported solid results the beat Zacks Consensus estimates by 2 cents.
Financial Profile
PPG is a large-cap (15.41 billion) company that is trading at about 12.8 times forward (expectations for next quarter) earnings. They have a PEG ratio of 1.05 and offer a dividend yield of 2.26% at current share values. PPG became a Zacks Rank 1 strong buy on April 11th ahead of their strong results on April 19th.
Quarter over quarter sales were up 6.7% compared to (fiscal) Q42011 with total sales of roughly 14.89 billion in FY2011. PPG earnings jumped from a $4.63 in profit during FY2010 to $6.87 in FY2011. PPG is expected to earn $7.88 in FY2012 according to the Zacks Consensus Estimate.
Earnings Estimates
PPG Industries has surprised analysts to the upside for the past 4 quarters + in a row with an average of 2.3% in the past year.
Expectations are for PPG to generate $2.35 in income this quarter. Of the 14 analysts who cover PPG, the consensus is for the company to grow earnings by 16% in the current year (FY2012) and roughly 10% in FY2013. In terms of the magnitude of analyst estimate trends, we are seeing all of the consensus estimates higher than they were 90 days ago for the current and next quarters as well as FY2012 and FY2013.
Being a relatively stable company, there is currently a 1% upside surprise potential for the next report given the most recent upgrades and estimate revision.
Market Performance & Technicals
PPG, like many of our momentum Rank-Buy stocks has been moving in a strong bullish channel since late 2011. There was a bullish crossover of the 50 day moving average above the 200 day.
PPG has not only maintained its position above those averages, but is solidity above its 50 and 200 day moving averages which currently stand at $94.28 and $84.95 respectively. Look for both of those levels as points of support, but a breach of the 200 day average may indicate a change in trend.
PPG has still managed to exceed the S&P 500’s performance by 6% in the past year and over 8% in the past 3 months. After the rally following earnings, PPG now leads the index by almost 10% over the last 30 days.
Jared A Levy is the Momentum Stock Strategist for Zacks.com. He is also the Editor in charge of the market-beating Zacks Whisper Trader Service.
