PPG Industries (PPG: 63.705 +1.555 +2.50%) defied the bearish camp by posting second quarter sales recently which jumped 11%. PPG is trading with a forward P/E of 14.1.PPG is one of the old mainline manufacturing companies with products in 3 segments: coatings, glass and chemicals.
Founded in 1883 and headquartered in Pittsburgh, the company has been a steady player for decades. It has paid a dividend, uninterrupted by wars, assassinations and the Great Depression, since 1899.
Recently, the company announced its 448th consecutive dividend payment which it also increased to 55 cents from 54 cents paid out the prior quarter. The dividend is payable on Sep 10 to shareholders of record as of Aug 10.
PPG Surprised on the Second Quarter by 14.7%
On July 15, PPG reported its second quarter results, which got lost in the shuffle amongst the Dow components reporting that day.
The company easily beat on the Zacks Consensus adding to its winning streak on surprising on estimates.
Earnings per share were $1.64 compared to the Zacks Consensus of $1.43. The company made 89 cents last year.
Sales jumped 11% to $3.5 billion from $3.1 billion in the second quarter of 2009.
The company has manufacturing facilities in more than 38 countries around the world so its diversity allows it to weather various economic conditions better than the smaller players.
Not surprisingly, higher industrial activity and strong demand in Asia/Pacific and the Latin America regions boosted the quarter. North America and Europe continued to see weak construction markets. But the gains in the emerging markets offset the losses in the other zones.
“Our earnings this quarter were aided by an improved sales mix from some of our top-performing businesses, such as aerospace, auto refinish and our Optical and Specialty Materials segment,” said Charles E. Bunch, chairman and chief executive officer.
Commodity Chemicals also rebounded significantly from the first quarter, as sales rose 13% on increased volumes.
However, overall demand remains 10% below pre-recession 2008 levels.
Zacks Consensus Estimates Jump
PPG did not provide any third quarter guidance. But that hasn’t stopped analysts from raising estimates for the quarter and the full year.
The third quarter Zacks Consensus Estimate rose by 6 cents to $1.32 in the last week as 4 estimates moved higher.
Analysts now expect the company to grow earnings by 50.4% in 2010 as the Zacks Consensus has jumped by 13 cents to $4.42 per share in the 7 days. 5 out of 13 estimates moved higher during that time.
Value Fundamentals
PPG, while a value stock, is slightly more expensive than the overall industry. Its price-to-book ratio is 2.7, but the industry is trading at 1.9. Its price-to-sales ratio of 0.80 is inline with the industry average.
The company’s return on equity continues to be excellent, at 18.2%, compared to the industry average of 12.5%.
Shareholders are rewarded, however, by a dividend yield much higher than the industry at 3.5% compared to 1.3%.
| Analysts' Targets | |
| Deutsche Bank Securities | $70 |
| Neutral | |
| Friday, July 16, 2010 | |
| UBS Securities | $72 |
| Hold | |
| Friday, April 16, 2010 | |
| Citigroup | $71 |
| Hold | |
| Thursday, January 14, 2010 | |
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