PPG Industries Inc. (PPG) is poised well for some strong gains. The company has seen its share price surge over the past month. The stock is up around 7.3% since Dec 16, 2014 when oil prices slumped to 5-year lows. Shares of PPG Industries touched a 52-week high of $232.46 on Dec 29, delivering a healthy yearly return of 25.3%.
Factors to Consider
PPG Industries with its diversified business, both in terms of products offered and geographical presence is in a leading position in several paints and coatings end markets. The company is taking measures to grow its business inorganically by making a number of acquisitions. PPG Industries recently announced that it is currently under negotiations with the AXSON Group to acquire REVOCOAT, a global supplier of sealants, adhesives and damper products for the automotive industry.
The company expects to wrap up the transaction in the first quarter of 2015, subject to regulatory approvals and other customary closing conditions. This acquisition would further strengthen PPG Industries’ foothold in the specialty materials and automotive market. Moreover, this buyout adequately complements PPG Industries’ core automotive original equipment manufacturer (“OEM”) coatings business.
Moreover, PPG Industries is slated to benefit from the recent fall in oil prices as it will lower its input costs and thus, lead to margin expansion. The company saw considerable gains across major regions, notably Europe where earnings soared 17% despite mixed sales performance recorded in its third-quarter results. Revenues went up around 4% year over year to $3,935 million in the reported quarter.
PPG Industries has also taken up an aggressive cost-cutting and restructuring strategy. Thus, the company’s growth strategies, coupled with cost-control measures, delivered great value to shareholders in 2013 and are expected to do the same in 2014. The company is expecting incremental savings between $75 million and $90 million from its restructuring and synergy programs in 2014.
The Zacks Consensus Estimate for fiscal 2014 increased 0.2% to $9.60 per share, following 5 upward estimate revisions over the last 60 days. For 2015, 5 estimates moved north over the same time frame, lifting the Zacks Consensus Estimate by around 2.3% to $11.24.
PPG Industries is a Zacks Rank #3 (Hold) stock.
Better-ranked stocks in the chemical space include Valhi, Inc. (VHI), Innospec Inc. (IOSP) and Kronos Worldwide, Inc. (KRO). While both Innospec and Valhi sport a Zacks Rank #1 (Strong Buy), Kronos Worldwide carries a Zacks Rank #2 (Buy).
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