Global paints and coatings supplier PPG Industries Inc. (PPG) reported sales for the first quarter of 2010 of $3.1 billion, up 12% versus the prior year’s first quarter.
Taking a one-time charge of $85 million or 52 cents per share, the Pittsburgh-based company reported a first quarter net income of $30 million or 18 cents. Adjusting for the one-time charge, PPG earned $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. Recovering end-markets and lower cost resulting from restructuring efforts helped earnings.
Segment Results
Performance Coatings: Revenues in the segment grew 4% to $965 million versus last year on higher selling prices offsetting volume declines. Volumes declined slightly in North America and Europe while they improved in Asia/Pacific and Latin America. A 43% increase in operating earnings in the segment was helped by lower costs.
Industrial Coatings: Quarterly revenues jumped 39% to $893 million driven by a 30% rise in volume. The segment reported operating earnings of $101 million in contrast to an operating loss of $16 million in the first quarter of 2009.
Architectural Coatings: Europe, Middle East and Africa segment sales for the quarter increased 7% year over year to $436 million. Segment earnings grew $8 million due to lower costs.
Optical and Specialty Materials: Segment sales for the quarter increased 16% to $284 million on higher volumes. Segment earnings rose $22 million due to improved sales volumes.
Commodity Chemicals: Sales for the quarter declined 9% to $328 million due to declines in year-over-year selling prices, partially offset by improving volumes. Segment earnings decreased $80 million due to lower selling prices and higher input costs, which were partially offset by higher sales volumes and lower manufacturing costs.
Glass: Sales improved 12% to $220 million on improved volumes, which were partially offset by lower pricing including reduced energy surcharges. Losses in the segment declined to $3 million from $27 million in the same quarter of 2009 on lower costs.
Cash and cash equivalent during the quarter were up 30% to $689 million from the first quarter of 2009. Debt totaled $3.2 billion as of March 31, 2010.
Estimate Revision Trends
PPG’s earnings of 70 cents in the quarter were ahead of the Zacks Consensus Estimate of 63 cents. PPG is expected to earn $1.22 and $3.93 per share in the second quarter and full year 2010, respectively, with an upside potential of 3.28% and a downside potential of 0.51%, respectively.
Over the last month, 2 out of the 11 analysts covering the stock have revised their estimates upward while 3 analysts have revised their estimates downward. Over the last 7 days, 2 analysts have revised their estimates negatively. With respect to earnings surprises, PPG has not missed the Zacks Consensus Estimate in any of the last trailing four quarters, reflected by the average surprise of 24.77%.
PPG has not provided any financial guidance for the next quarter. We remain Neutral on the stock.
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