PPG Industries to Post Q3 Earnings: What's in the Offing?

PPG Industries Inc. PPG is set to release third-quarter 2024 results after the closing bell on Oct. 16.

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PPG Industries beat the Zacks Consensus Estimate for earnings in three of the trailing four quarters while delivering in-line results on the other occasion. It has a trailing four-quarter earnings surprise of around 2.2%, on average. The paint giant is expected to have benefited from acquisitions, pricing actions and restructuring cost savings in the third quarter. Its performance is likely to have been impacted by weak demand, especially in Europe.

PPG's shares are down 1.4% in the past year compared with a 4.3% decline of the industry.

 

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Let’s see how things are shaping up for this announcement.

What do PPG’s Estimates Say?

The Zacks Consensus Estimate for sales for the to-be-reported quarter is currently pegged at $4,652.7 million, which suggests a rise of around 0.2% from the year-ago quarter.  

Our estimate for PPG’s Industrial Coatings segment’s net sales is pegged at $1,719.9 million, indicating a 2.5% decline on a year-over-year basis.

Also, our estimate for net sales for the Performance Coatings segment stands at $3,006.7 million, suggesting a year-over-year increase of 4.4%.

Factors at Play for PPG Stock

PPG is likely to have benefited from higher pricing, manufacturing efficiencies, cost actions and efforts to grow its business through acquisitions in the quarter to be reported. The company is implementing a cost-cutting and restructuring strategy and optimizing its working capital requirements. The cost savings generated by these restructuring initiatives will act as a tailwind for the company. PPG Industries has made considerable cost-cutting efforts, focused especially on locations and end markets with poor economic conditions. The company expects an additional $8-10 million in restructuring savings in the third quarter. 

PPG is raising selling prices across its business segments to offset cost inflation and drive profitability. It witnessed a year-over-year improvement in consolidated segment margin in the second quarter. The second quarter marked the seventh consecutive quarter of year-over-year margin growth. Pricing actions are likely to have aided its margins in the September quarter.

The company is taking steps to build its business inorganically by making value-creating acquisitions. Acquisition contributions are expected to reflect on the company's third-quarter performance. Acquisitions such as Tikkurila, Worwag and Cetelon are likely to have supported its top line.

PPG remains exposed to soft demand conditions in Europe and China. Industrial production remains subdued, primarily attributed to cautious consumer purchasing patterns in Europe and a slow recovery in China. Weakened demand in specific end-use markets within the United States has contributed to the challenges.

PPG is seeing lower sales volumes for automotive refinish coatings in the United States. Geopolitical tensions in Europe stemming from the Russia-Ukraine conflict and weak consumer confidence have further dampened demand. Weak demand is likely to have impacted volumes in the third quarter. While PPG is seeing improved demand for its products in China, it remains challenged by lower overall demand in Europe. The softness in industrial coatings is expected to have continued in the third quarter due to the sluggish global industrial production. Automotive OEM coatings volumes are also expected to remain under pressure in Europe and the United States due to weak automotive build rates.

What Our Model Unveils for PPG

Our proven model does not conclusively predict an earnings beat for PPG this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. But that’s not the case here.

Earnings ESP: Earnings ESP for PPG is -1.33%. The Zacks Consensus Estimate for earnings for the third quarter is currently pegged at $2.15. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: PPG currently carries a Zacks Rank #4 (Sell).

Basic Materials Stocks That Warrant a Look

Here are some companies in the basic materials space you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:

Agnico Eagle Mines Limited AEM, scheduled to release earnings on Oct. 30, has an Earnings ESP of +4.38% and carries a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

The consensus estimate for AEM’s earnings for the third quarter is currently pegged at 96 cents.

CF Industries Holdings, Inc. CF, slated to release earnings on Oct. 30, has an Earnings ESP of +10.58% and carries a Zacks Rank #1 at present.

The consensus mark for CF’s third-quarter earnings is currently pegged at $1.04.

Kinross Gold Corporation KGC, scheduled to release third-quarter earnings on Nov. 5, has an Earnings ESP of +13.92%.

The Zacks Consensus Estimate for Kinross Gold's earnings for the third quarter is currently pegged at 16 cents. KGC currently carries a Zacks Rank #3.

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PPG Industries, Inc. (PPG): Free Stock Analysis Report
 
CF Industries Holdings, Inc. (CF): Free Stock Analysis Report
 
Kinross Gold Corporation (KGC): Free Stock Analysis Report
 
Agnico Eagle Mines Limited (AEM): Free Stock Analysis Report

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