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PPG Industries beat the Zacks Consensus Estimate for earnings in three of the trailing four quarters while delivering in-line results on the other occasion. It has a trailing four-quarter earnings surprise of around 3.3%, on average. The paint giant is expected to have benefited from acquisitions, pricing actions and restructuring cost savings in the second quarter. However, its performance is likely to have been impacted by weak demand, especially in Europe.
PPG's shares are down 13.4% in the past year compared with a 13.6% decline of the industry.
Image Source: Zacks Investment Research
Let’s see how things are shaping up for this announcement.
What do the Estimates Say?
The Zacks Consensus Estimate for sales for the to-be-reported quarter is currently pegged at $4,921.3 million, which implies a rise of around 1% from the year-ago reported number.
Our estimate for PPG’s Industrial Coatings segment’s net sales is pegged at $1,831.9 million, flat on a year-over-year basis.
Also, our estimate for net sales for the Performance Coatings segment stands at $3,101.8 million, suggesting a year-over-year increase of 2%.
Factors at Play
PPG is likely to have benefited from higher pricing, manufacturing efficiencies, cost actions and efforts to grow its business through acquisitions in the second quarter. The company is implementing a cost-cutting and restructuring strategy and optimizing its working capital requirements.
The cost savings generated by these restructuring initiatives will act as a tailwind for the company. PPG Industries has made considerable cost-cutting efforts, focused especially on locations and end markets with poor economic conditions. The company achieved $8 million of incremental cost savings in first-quarter 2024. It expects an additional $7-$9 million in restructuring savings in the second quarter.
PPG is raising selling prices across its business segments to offset cost inflation and drive profitability. It witnessed a year-over-year improvement in consolidated segment margin in the first quarter. Notably, the first quarter marked the sixth consecutive quarter of year-over-year margin growth. Pricing actions are likely to have aided its margins in the June quarter.
The company is taking steps to build its business inorganically by making value-creating acquisitions. Acquisition contributions are expected to reflect on the company's second-quarter performance. Acquisitions such as Tikkurila, Worwag and Cetelon are likely to have supported its top line.
However, the company remains exposed to exposed to soft demand conditions in Europe and China. Industrial production remains subdued, primarily attributed to cautious consumer purchasing patterns in Europe and a slow recovery in China. Additionally, weakened demand in specific end-use markets within the United States has contributed to the challenges.
PPG is seeing lower sales volumes for automotive refinish coatings in the United States partly due to weaker body shop activities. Geopolitical tensions in Europe stemming from the Russia-Ukraine conflict have further dampened demand. Weak demand is likely to have impacted volumes in the second quarter.
While PPG is seeing improved demand for its products in China, it remains challenged by lower overall demand in Europe. The company expects global industrial production and demand in Europe to remain at low levels in the second quarter. The softness in industrial coatings is expected to have continued in the second quarter due to the sluggish global industrial production.
Our proven model does not conclusively predict an earnings beat for PPG Industries this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. But that’s not the case here.
Earnings ESP: Earnings ESP for PPG Industries is -1.70%. The Zacks Consensus Estimate for earnings for the second quarter is currently pegged at $2.48. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: PPG Industries currently carries a Zacks Rank #4 (Sell).
Stocks That Warrant a Look
Here are some companies in the basic materials space you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:
The consensus estimate for AEM’s earnings for the second quarter is currently pegged at 81 cents.
ATI Inc. (ATI - Free Report) , slated to release earnings on Aug 6, has an Earnings ESP of +3.50% and carries a Zacks Rank #3 at present.
The consensus mark for ATI’s second-quarter earnings is currently pegged at 58 cents.
Kinross Gold Corporation (KGC - Free Report) , scheduled to release second-quarter earnings on Jul 31, has an Earnings ESP of +27.66%.
The Zacks Consensus Estimate for Kinross Gold's earnings for the second quarter is currently pegged at 12 cents. KGC currently carries a Zacks Rank #1.
Image: Bigstock
PPG Industries (PPG) to Post Q2 Earnings: What's in the Cards?
PPG Industries Inc. (PPG - Free Report) is set to release second-quarter 2024 results after the closing bell on Jul 18.
PPG Industries beat the Zacks Consensus Estimate for earnings in three of the trailing four quarters while delivering in-line results on the other occasion. It has a trailing four-quarter earnings surprise of around 3.3%, on average. The paint giant is expected to have benefited from acquisitions, pricing actions and restructuring cost savings in the second quarter. However, its performance is likely to have been impacted by weak demand, especially in Europe.
PPG's shares are down 13.4% in the past year compared with a 13.6% decline of the industry.
Image Source: Zacks Investment Research
Let’s see how things are shaping up for this announcement.
What do the Estimates Say?
The Zacks Consensus Estimate for sales for the to-be-reported quarter is currently pegged at $4,921.3 million, which implies a rise of around 1% from the year-ago reported number.
Our estimate for PPG’s Industrial Coatings segment’s net sales is pegged at $1,831.9 million, flat on a year-over-year basis.
Also, our estimate for net sales for the Performance Coatings segment stands at $3,101.8 million, suggesting a year-over-year increase of 2%.
Factors at Play
PPG is likely to have benefited from higher pricing, manufacturing efficiencies, cost actions and efforts to grow its business through acquisitions in the second quarter. The company is implementing a cost-cutting and restructuring strategy and optimizing its working capital requirements.
The cost savings generated by these restructuring initiatives will act as a tailwind for the company. PPG Industries has made considerable cost-cutting efforts, focused especially on locations and end markets with poor economic conditions. The company achieved $8 million of incremental cost savings in first-quarter 2024. It expects an additional $7-$9 million in restructuring savings in the second quarter.
PPG is raising selling prices across its business segments to offset cost inflation and drive profitability. It witnessed a year-over-year improvement in consolidated segment margin in the first quarter. Notably, the first quarter marked the sixth consecutive quarter of year-over-year margin growth. Pricing actions are likely to have aided its margins in the June quarter.
The company is taking steps to build its business inorganically by making value-creating acquisitions. Acquisition contributions are expected to reflect on the company's second-quarter performance. Acquisitions such as Tikkurila, Worwag and Cetelon are likely to have supported its top line.
However, the company remains exposed to exposed to soft demand conditions in Europe and China. Industrial production remains subdued, primarily attributed to cautious consumer purchasing patterns in Europe and a slow recovery in China. Additionally, weakened demand in specific end-use markets within the United States has contributed to the challenges.
PPG is seeing lower sales volumes for automotive refinish coatings in the United States partly due to weaker body shop activities. Geopolitical tensions in Europe stemming from the Russia-Ukraine conflict have further dampened demand. Weak demand is likely to have impacted volumes in the second quarter.
While PPG is seeing improved demand for its products in China, it remains challenged by lower overall demand in Europe. The company expects global industrial production and demand in Europe to remain at low levels in the second quarter. The softness in industrial coatings is expected to have continued in the second quarter due to the sluggish global industrial production.
PPG Industries, Inc. Price and EPS Surprise
PPG Industries, Inc. price-eps-surprise | PPG Industries, Inc. Quote
Zacks Model
Our proven model does not conclusively predict an earnings beat for PPG Industries this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. But that’s not the case here.
Earnings ESP: Earnings ESP for PPG Industries is -1.70%. The Zacks Consensus Estimate for earnings for the second quarter is currently pegged at $2.48. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: PPG Industries currently carries a Zacks Rank #4 (Sell).
Stocks That Warrant a Look
Here are some companies in the basic materials space you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:
Agnico Eagle Mines Limited (AEM - Free Report) , scheduled to release earnings on Jul 31, has an Earnings ESP of +5.68% and carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
The consensus estimate for AEM’s earnings for the second quarter is currently pegged at 81 cents.
ATI Inc. (ATI - Free Report) , slated to release earnings on Aug 6, has an Earnings ESP of +3.50% and carries a Zacks Rank #3 at present.
The consensus mark for ATI’s second-quarter earnings is currently pegged at 58 cents.
Kinross Gold Corporation (KGC - Free Report) , scheduled to release second-quarter earnings on Jul 31, has an Earnings ESP of +27.66%.
The Zacks Consensus Estimate for Kinross Gold's earnings for the second quarter is currently pegged at 12 cents. KGC currently carries a Zacks Rank #1.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.