Why You Should Keep PPG Industries (PPG) in Your Portfolio

PPG Industries Inc. PPG should benefit from its cost-control actions, pricing initiatives and acquisitions amid headwinds including weak industrial demand.

Shares of the paints giant are up 36.3% over a year, outperforming its industry’s 14.7% decline.

 

Let’s see why this Zacks Rank #3 (Hold) stock is worth retaining at the moment.

What’s Going in PPG’s Favor?

PPG Industries is aggressively managing costs and is also implementing appropriate pricing actions. It remains focused on improving its cost structure and recovering margins through price increases amid an inflationary environment.

PPG Industries expects to achieve $20 million in cost savings in the fourth quarter of 2019. The company is implementing a new cost-savings program, which targets full-year run-rate savings of roughly $125 million once completed.

The company is also taking steps to grow business through strategic acquisitions. PPG Industries, in early 2019, completed the acquisitions of Whitford Worldwide and Hemmelrath. It expects these two along with the SEM Products acquisition to add around $400 million in annualized revenues.

PPG Industries also completed the purchase of specialty materials maker, Dexmet Corporation, in the third quarter of 2019. The acquisition enables the company to add value to customers by enhancing product offerings as well as expanding R&D capabilities. It will also increase its market reach across the automotive, aerospace and industrial coatings businesses.

The company also remains committed in its cash deployment with a focus on shareholder value creation over the long term. The company, in July 2019, raised its quarterly dividend by 6% to 51 cents per share.

A Few Headwinds

PPG Industries faces challenges from sluggish global industrial activities. The company saw soft industrial production growth across all regions through the first three quarters of 2019. Headwinds from weak industrial demand are likely to continue to negatively impact its volumes. The company’s sales volumes in the Industrial Coatings segment are expected to remain under pressure.

The company also faces some headwind from unfavorable currency translation. Currency swings reduced its sales by around 2% or around $80 million in the third quarter. Moreover, earnings were negatively affected by roughly $10 million or 4 cents per share due to unfavorable foreign currency translation. The company expects unfavorable currency translation impact on sales to persist at a similar rate in the fourth quarter.

PPG Industries, Inc. Price and Consensus

 

PPG Industries, Inc. Price and Consensus

PPG Industries, Inc. price-consensus-chart | PPG Industries, Inc. Quote

Stocks to Consider

Some better-ranked stocks worth considering in the basic materials space include Kirkland Lake Gold Ltd. KL, Arconic Inc. ARNC and Franco-Nevada Corporation FNV, all carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Kirkland Lake Gold has projected earnings growth rate of 15.4% for 2020. The company’s shares have surged around 65% over a year.

Arconic has a projected earnings growth rate of 13.6% for 2020. The company’s shares have rallied roughly 67% in a year’s time.

Franco-Nevada has estimated earnings growth rate of 25.4% for 2020. The company’s shares have shot up roughly 45% in a year’s time.

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PPG Industries, Inc. (PPG) : Free Stock Analysis Report
 
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