Seaport Global Securities has sustained its Buy rating on PPG Industries (NYSE: NYSE:PPG), with a price target set at $165.00.
PPG Industries reported earnings per share (EPS) that aligned with Seaport's recently lowered expectations.
Despite this, sales and margins were not as strong as predicted. The EPS benefited from approximately $0.10 due to lower-than-expected interest expenses and a reduced tax rate. Organic sales remained flat year-over-year, falling short of the modest 1% growth projected by Seaport.
Operating margins saw a slight year-over-year increase of 10 basis points but were 80 basis points below Seaport's estimates. The Performance Coatings segment performed close to expectations in terms of sales, with operating margins exceeding the forecast by 60 basis points, showing a significant year-over-year improvement of 190 basis points.
However, Industrial Coatings sales were about 2% below Seaport's model, and operating margins were notably weaker, declining 190 basis points year-over-year and 280 basis points from the previous quarter.
PPG Industries cited lower volumes and pricing as the primary reasons for the disappointing margin performance in the Industrial Coatings segment. The company anticipates EPS for 2024 to be at the lower end of the previously provided range of $8.15 to $8.30, suggesting a fourth-quarter EPS of $1.65, which is below the consensus estimate of $1.70. P
PG highlighted expected weaknesses in automotive and industrial markets in the fourth quarter but projected demand growth for industrial coatings in China over the coming quarters.
In other recent news, PPG Industries reported mixed results for its third quarter, with earnings surpassing estimates but revenue falling short. The company posted adjusted earnings per share of $2.13, beating the analyst consensus of $2.16, while revenue came in at $4.58 billion, below the expected $4.67 billion. Sales in PPG's Performance Coatings segment increased 1% year-over-year to $2.92 billion, while the Industrial Coatings segment saw a decline of 6% to $1.65 billion.
CEO Tim Knavish noted positive volume growth in seven of their ten businesses, despite challenges in the automotive original equipment manufacturer sector. The company remains steadfast in its full-year 2024 guidance, predicting organic sales to be flat and adjusted earnings per share to be at the low end of the $8.15 to $8.30 range.
InvestingPro Insights
PPG Industries' financial health and market position offer additional context to the Seaport Global Securities analysis. According to InvestingPro data, PPG boasts a market capitalization of $30.43 billion, reflecting its significant presence in the coatings industry. The company's P/E ratio of 21.35 suggests investors are willing to pay a premium for its earnings, which aligns with its established market position.
InvestingPro Tips highlight PPG's strong dividend history, having raised its dividend for 53 consecutive years and maintained payments for 54 years. This consistent dividend growth, coupled with a current dividend yield of 2.09%, underscores the company's commitment to shareholder returns despite the challenges noted in the earnings report.
Moreover, PPG's perfect Piotroski Score of 9, as reported by InvestingPro, indicates robust financial health across various metrics. This score supports Seaport's maintained Buy rating, suggesting that despite short-term headwinds in certain segments, PPG's overall financial foundation remains solid.
For investors seeking a deeper understanding of PPG's financial landscape, InvestingPro offers 8 additional tips, providing a comprehensive view of the company's prospects and potential risks.
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