PPG Industries (PPG) Misses Q2 Earnings & Sales Estimates

·4-min read

PPG Industries Inc. PPG logged net income from continuing operations of $431 million or $1.80 per share in second-quarter 2021, up from the year-ago quarter’s profit of $99 million or 42 cents per share.

Barring one-time items, adjusted earnings were $1.94 per share in the reported quarter, up from $1.09 logged in the year-ago quarter. However, the figure missed the Zacks Consensus Estimate of $2.19.

Net sales rose roughly 44.6% year over year to $4,359 million. However, the figure missed the Zacks Consensus Estimate of $4,418.2 million. Sales volumes were up around 24% year over year on the back of strong demand recovery across many end-use markets. Favorable foreign currency translation impact was around 6%, while acquisition contributed around 11% to sales growth. Selling prices rose roughly 3.5%.

The company benefited from higher year-over-year sales in the Industrial Coatings segment in the quarter, led by recovery in global industrial demand. It also witnessed strength in global architectural coatings business. However, supply disruptions coupled with higher raw material and transportation costs hurt its results.

PPG Industries, Inc. Price, Consensus and EPS Surprise

PPG Industries, Inc. Price, Consensus and EPS Surprise
PPG Industries, Inc. Price, Consensus and EPS Surprise

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

Segment Highlights

Performance Coatings: Net sales in the segment were around $2.7 billion in the second quarter, up around 33% year over year. Sales volume in the segment increased around 9%. Selling prices rose more than 3%.

Segment income increased roughly 25% year over year to $454 million. The upside can be attributed to the impact of the improved sales volumes, increased selling prices and higher demand for architectural trade products.

Industrial Coatings: Sales in the segment totaled around $1.6 billion, up around 70% from the prior-year quarter’s figure. Sales volumes rose 56% year over year due to recovery in global industrial demand. Selling prices were also up 4% year over year.

Net income in the segment totaled $190 million, up around 458% year over year. Results were driven by restructuring cost savings, higher sales volumes and favorable currency impact.

Financials

PPG Industries ended the second quarter with cash and cash equivalents of $1,195 million, down roughly 46.9% year over year. Long-term debt rose around 38.5% year over year to $6,387 million.

Moreover, PPG Industries delivered almost $40 million of incremental structural cost savings from business restructuring programs in the reported quarter. The company forecasts full-year 2021 cost savings of $135 million.

Outlook

The company expects higher aggregate input and logistics costs in the third quarter compared with the second quarter. It will continue to prioritize further selling price increases, which it expects to fully offset raw material cost inflation before the end of 2021, on a run-rate basis.

The overall economic demand growth is projected to remain very broad and strong. As supply conditions normalize, it expects strong sales growth later this year and into 2022 aided by its technology-advantaged products, its diverse geographic and end-use market participation as well as continuing recovery from its aerospace business, the company noted.

PPG Industries also expects structural cost savings from restructuring actions of roughly $30 million year over year in the third quarter. Corporate expenses are expected to increase to $60 million in the third quarter from $52 million in the second quarter. Net interest expenses are expected between $28 million and $30 million.

The company also sees adjusted earnings for the full year to be $7.4-$7.6 per share.

Price Performance

Shares of PPG Industries have rallied 50.5% in the past year compared with 31.7% rise of the industry.

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Zacks Investment Research


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Zacks Rank & Other Key Picks

PPG Industries currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the basic materials space are Nucor Corporation NUE, Olin Corporation OLN and Cabot Corporation CBT.

Nucor has a projected earnings growth rate of around 403% for the current year. The company’s shares have surged 115% in a year. It currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Olin has an expected earnings growth rate of around 523.7% for the current year. The company’s shares have skyrocketed 239.2% in the past year. It currently sports a Zacks Rank #1.

Cabot has an expected earnings growth rate of around 137.5% for the current fiscal. The company’s shares have surged 36.4% in the past year. It currently flaunts a Zacks Rank #1.


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