On Jan 19, we issued an updated research report on PPG Industries (PPG). The Pennsylvania-based coatings giant is well placed to gain from continued strength across North American automotive and aerospace markets, synergies from acquisitions and cost-saving measures.
PPG Industries’ adjusted earnings for fourth-quarter 2014, reported on Jan 15, topped the Zacks Consensus Estimate. Revenues also surpassed expectations on gains across aerospace and automotive refinish businesses. Reported profit, however, slid on hefty debt refinancing charges.
Going forward, PPG Industries will remain committed to effectively deploying cash on further earnings-accretive opportunities. The company sees growth to remain mixed by region in 2015 with North America and Asia continuing to grow at levels that are in tandem with 2014.
PPG Industries has a diversified business and a leading position in several paints and coatings end markets. Healthy momentum across automotive OEM, automotive refinish and aerospace markets and continued demand recovery in Europe are expected to support its results moving ahead. The company’s cost containment measures through its restructuring program should also aid to its earnings.
PPG Industries is also taking steps to grow its business inorganically by making a number of acquisitions. The acquisition of Akzo Nobel’s (AKZOY) North American architectural coatings business has reinforced its branded paint product offerings and scale in the North American architectural paint market. The company has already realized its targeted annual synergies from the buyout.
In addition, the recent buyout of Mexico’s leading paint company – Consorcio Comex S.A. de C.V. – for $2.3 billion represents a significant move by PPG as it will boost its foothold in Mexico and Central America by offering a leading architectural coatings portfolio. PPG Industries expects the acquisition to add around $1 billion to its sales in 2015 and be accretive to its earnings.
PPG Industries also has an impressive record of returning cash to shareholders through dividends and share buybacks. It returned over $1.1 billion to its shareholders in the form of dividend and share repurchases in 2014.
PPG Industries spent $2.5 billion on acquisitions last year. It expects to deploy $1.5 billion to $2.5 billion of cash in this year and 2016 combined on acquisitions and share buybacks.
Other Stocks to Consider
Other companies in the chemical industry worth considering include Innophos Holdings Inc (IPHS) and Olin Corp. (OLN) with both holding a Zacks Rank #1 (Strong Buy).
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