It has been about a month since the last earnings report for PPG Industries (PPG). Shares have added about 3.2% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is PPG Industries due for a pullback? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
PPG Industries' Earnings & Sales Beat Estimates in Q2
PPG Industries reported net income from continuing operations of $99 million or 42 per share in second-quarter 2020, down from the year-ago quarter’s profit of $270 million or $1.13 per share.
Barring one-time items, adjusted earnings were 99 cents per share in the reported quarter, down 46.5% from $1.85 logged in the year-ago quarter. Nevertheless, the figure topped the Zacks Consensus Estimate of 65 cents.
Net sales declined 25.1% year over year to $3,015 million. However, the figure surpassed the Zacks Consensus Estimate of $2,833 million. Unfavorable currency swings affected net sales by more than 3%. Sales volume fell 24% year over year.
Segment Highlights
Performance Coatings: Net sales in the segment amounted to around $2.1 billion in the second quarter, down 15% year over year. Sales volume in the segment declined around 15%. Unfavorable foreign currency translation impacted net sales by 4%.
Segment income declined 15% year over year to $362 million. Reduced sales volume associated with the coronavirus pandemic and unfavorable foreign currency translation were partly offset by higher selling prices, cost mitigation measures and restructuring initiatives.
Industrial Coatings: Sales in the segment totaled around $950 million, down roughly 40% from the prior-year quarter’s figure. The benefits of slightly higher selling prices were offset by 38% decline in sales volume. Also, unfavorable foreign currency translation lowered sales by around 3% on a year-over-year basis.
Net income in the segment totaled $34 million, down around 85% year over year. Reduced sales volume due to customer shutdowns associated with the coronavirus pandemic were partly offset by modestly higher selling prices, cost mitigation measures and restructuring cost savings.
Financial Position
As of Jun 30, 2020, PPG Industries had cash and cash equivalents of $2,252 million, up 133.9% year over year. Long-term debt fell 4.8% year over year to $4,613 million.
Outlook
Going forward, the company expects to achieve restructuring savings of $60-$70 million in the second half of 2020.
PPG Industries also expects total sales volume for the third quarter to decline 8-15%. The company stated that the wide range is due to the uncertainty associated with the impact of the coronavirus pandemic.
Moreover, it anticipates corporate expenses of $50-$55 million and net interest expenses of $32-$36 million for the third quarter.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 17.4% due to these changes.
VGM Scores
Currently, PPG Industries has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren’t focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise PPG Industries has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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