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Category: Stock Market and PPG Industries
Date: 20 January 2020 Stock Price: $128.49 We take a look at the 4th quarter earnings report of their 2019 fiscal year of PPG Industries a painting and coatings supplier across various industries including the aviation, automotive and shipping industries.
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About PPG Industries
At PPG (NYSE:PPG), we work every day to develop and deliver the paints, coatings and materials that our customers have trusted for more than 135 years. Through dedication and creativity, we solve our customers’ biggest challenges, collaborating closely to find the right path forward. With headquarters in Pittsburgh, we operate and innovate in more than 70 countries and reported net sales of $15.4 billion in 2018. We serve customers in construction, consumer products, industrial and transportation markets and aftermarkets.
Overview of PPG's 4th quarter 2019 earnings report
Data below is reported for the latest quarter unless stated otherwise
- Net sales: $3.726 billion (up from $3.645 billion for the same quarter of the previous year)
- Net sales increased by 2.2% over the last 12 months
- Cost of sales: $2.111 billion (down from $2.188 billion for the same quarter of the previous year)
- Cost of sales decreased by -3.5% over the last 12 months
- Net income: $292 million (up from $258 million for the same quarter of the previous year)
- Diluted earnings per share: $1.22 (up from $1.08 for the same quarter of the previous year)
- PE ratio of PPG industries: 26.1
- Dividend declared for quarter: $0.51
- Dividend yield of PPG industries: 1.6%
- Dividend yield of PPG industries: 1.6%
- Diluted weighted-average shares outstanding: 236.5 million (down from 239.8 million for the same quarter of the previous year)
- Cash and cash equivalents: $1.216 billion
- Cash and cash equivalents per share: $5.14
- Cash and cash equivalents makes up 4.00% of PPG's market capital
- Cash and cash equivalents makes up 19,7% of PPG's current assets
- Receivables: $2.756 billion
- Receivables makes up 44.66% of PPG's current assets
- Inventories: $1.860 billion
- Inventories makes up 27.7% of PPG's current assets
PPG's management commentary on the results and outlook
PITTSBURGH--(BUSINESS WIRE)-- PPG (NYSE:PPG) today reported fourth quarter 2019 net sales of nearly $3.7 billion, up approximately 1% versus the prior year. Net sales in constant currencies grew about 2% year-over-year, aided by higher selling prices of almost 2%. Sales volumes declined nearly 3% versus the prior year. Unfavorable foreign currency translation impacted net sales by approximately 1%, or about $30 million, and acquisition-related sales, net of divestitures, added nearly 3% to net sales.
“For the second consecutive quarter, we delivered adjusted earnings per share growth of more than 10%, reflecting continuing improvement in our segment operating margins, which increased 160 basis points year-over-year,” said Michael H. McGarry, PPG chairman and chief executive officer. “We delivered this strong performance in spite of weakening global manufacturing activity that impacted many of our industrial end-use markets. As the quarter progressed, industrial demand began to stabilize in China, but remained challenged in Europe and the U.S.
“For the full year, we delivered adjusted earnings per diluted share growth of about 8%, excluding foreign currency translation, firmly within the 2019 earnings guidance we provided last January. I am pleased that we achieved our earnings target despite macroeconomic conditions that weakened throughout the year. This record performance, including strong adjusted earnings and cash flow growth, reflects our focus on delivering value-added products and services to our customers and our focus on operational excellence and working capital improvement.
“Strategically, we completed several acquisitions during the year including Whitford, Hemmelrath, Dexmet, and Texstars. Annualized revenue of the acquisitions we have announced since December 2018 is approximately $500 million, of which about $100 million is in the Asia-Pacific region. We are pleased to welcome these businesses, their customers and our new employees into the PPG family.
“For the second consecutive quarter, we delivered adjusted earnings per share growth of more than 10%, reflecting continuing improvement in our segment operating margins, which increased 160 basis points year-over-year,” said Michael H. McGarry, PPG chairman and chief executive officer. “We delivered this strong performance in spite of weakening global manufacturing activity that impacted many of our industrial end-use markets. As the quarter progressed, industrial demand began to stabilize in China, but remained challenged in Europe and the U.S.
“For the full year, we delivered adjusted earnings per diluted share growth of about 8%, excluding foreign currency translation, firmly within the 2019 earnings guidance we provided last January. I am pleased that we achieved our earnings target despite macroeconomic conditions that weakened throughout the year. This record performance, including strong adjusted earnings and cash flow growth, reflects our focus on delivering value-added products and services to our customers and our focus on operational excellence and working capital improvement.
“Strategically, we completed several acquisitions during the year including Whitford, Hemmelrath, Dexmet, and Texstars. Annualized revenue of the acquisitions we have announced since December 2018 is approximately $500 million, of which about $100 million is in the Asia-Pacific region. We are pleased to welcome these businesses, their customers and our new employees into the PPG family.
Our 2019 cash flow from operations totaled approximately $2.1 billion, which is about $600 million higher than 2018 and an all-time record for any year. We also continued our legacy of returning cash to shareholders, with about $800 million returned in 2019 through share repurchases and dividends, including a per share dividend increase for the 48th consecutive year,” McGarry continued.
“As we start 2020, we expect organic growth in our Performance Coatings segment to continue as we supply various consumer-facing and aftermarkets where demand remains solid, although segment sales will be impacted due to lower production rates by an aerospace customer. With respect to our Industrial Coatings segment, we anticipate a return to volume growth in the second half of 2020. At the outset of this year, we are beginning to see a modest recovery in China industrial demand, but expect weak general industrial demand to continue in Europe and the U.S. We will continue to aggressively manage our businesses based on these forecasts. Given these expectations, our full-year 2020 financial guidance is as follows:
“Our guidance range is broad reflecting the heightened level of uncertainty at this particular time. Embedded in our guidance is first quarter earnings per diluted share from continuing operations of $1.32 to $1.42.
“I am very pleased with our team’s ability to achieve record adjusted earnings per diluted share results in 2019, despite broad contraction in industrial demand in most parts of the world. We remain committed to investing in the development of innovative products and solutions for our customers while continuously improving our operational performance. We strongly believe this is a great formula for long-term shareholder value creation. We have an outstanding team and are well-positioned strategically and financially to continue our growth,” concluded McGarry.
“As we start 2020, we expect organic growth in our Performance Coatings segment to continue as we supply various consumer-facing and aftermarkets where demand remains solid, although segment sales will be impacted due to lower production rates by an aerospace customer. With respect to our Industrial Coatings segment, we anticipate a return to volume growth in the second half of 2020. At the outset of this year, we are beginning to see a modest recovery in China industrial demand, but expect weak general industrial demand to continue in Europe and the U.S. We will continue to aggressively manage our businesses based on these forecasts. Given these expectations, our full-year 2020 financial guidance is as follows:
- Sales growth of 1 to 3 percent in constant currencies, including recently announced acquisitions
- Adjusted earnings per share growth of 4% to 9%, excluding currency translation impacts
“Our guidance range is broad reflecting the heightened level of uncertainty at this particular time. Embedded in our guidance is first quarter earnings per diluted share from continuing operations of $1.32 to $1.42.
“I am very pleased with our team’s ability to achieve record adjusted earnings per diluted share results in 2019, despite broad contraction in industrial demand in most parts of the world. We remain committed to investing in the development of innovative products and solutions for our customers while continuously improving our operational performance. We strongly believe this is a great formula for long-term shareholder value creation. We have an outstanding team and are well-positioned strategically and financially to continue our growth,” concluded McGarry.
PPG Industries (NYSE: PPG) stock price history
The image below, obtained from Google, shows the stock price history of PPG Industries over the last 5 years. And it's been a very volatile but overall pretty good time for PPG stockholders. 5 years ago it was trading at $113.90 and its currently trading at around $128.49 a stock. That's a return of 12.8% provided to PPG stockholders over the last 5 years.
The stock of PPG is trading at a lot closer to its 52 week high of $134.90 than it is to its 52 week low of $100.90 which to us is a clear indication that the short term sentiment and momentum of PPG's stock is fairly positive at this point in time.
The stock of PPG is trading at a lot closer to its 52 week high of $134.90 than it is to its 52 week low of $100.90 which to us is a clear indication that the short term sentiment and momentum of PPG's stock is fairly positive at this point in time.
Recent coverage of PPG Industries
The extract below discusses PPG's latest dividend announcement obtained from TheStreet.com
Shares of PPG (PPG) - Get Report eased Thursday after the Pittsburgh paints-and-coatings maker missed Wall Street's fourth-quarter-earnings forecasts.
The company reported earnings of $292 million, or $1.22 a share, up from $258 million, or $1.08, in the year-earlier quarter. Adjusted earnings came to $1.31, missing analysts' estimates of $1.34.
Revenue edged up 0.7% to $3.67 billion, matching Wall Street's forecast as calculated by FactSet. Sales volumes declined nearly 3% compared with the prior year. Unfavorable foreign currency translation hurt net sales by about 1%, or about $30 million, and acquisition-related sales, net of divestitures, added nearly 3% to net sales.
"As the quarter progressed, industrial demand began to stabilize in China, but remained challenged in Europe and the U.S.," Michael H. McGarry, chairman and CEO, said in a statement
Read the full article here
Shares of PPG (PPG) - Get Report eased Thursday after the Pittsburgh paints-and-coatings maker missed Wall Street's fourth-quarter-earnings forecasts.
The company reported earnings of $292 million, or $1.22 a share, up from $258 million, or $1.08, in the year-earlier quarter. Adjusted earnings came to $1.31, missing analysts' estimates of $1.34.
Revenue edged up 0.7% to $3.67 billion, matching Wall Street's forecast as calculated by FactSet. Sales volumes declined nearly 3% compared with the prior year. Unfavorable foreign currency translation hurt net sales by about 1%, or about $30 million, and acquisition-related sales, net of divestitures, added nearly 3% to net sales.
"As the quarter progressed, industrial demand began to stabilize in China, but remained challenged in Europe and the U.S.," Michael H. McGarry, chairman and CEO, said in a statement
Read the full article here
PPG Industries (NYSE: PPG) latest stock valuation
So what is PPG's stock worth based on the release of their latest earnings report? Based on PPG's latest earnings report provided our valuation model provides a target (full value) price at $106.50 a PPG stock (up from our 3rd quarter 2019 earnings review and valuation of PPG Industries). We therefore believe that the stock is overvalued.
We usually suggest long term fundamental or value investors look to enter into a stock at least 10% below our target (full value) price which in this case s $106.50. Therefore we see a good entry point into PPG's stock at $95.90 or below. We expect the stock of PPG to pull back from current levels in coming weeks and months to more realistic valuation levels closer to our target (full value) price for PPG Industries as we do believe the stock cannot hold on to its current valuation levels.
We usually suggest long term fundamental or value investors look to enter into a stock at least 10% below our target (full value) price which in this case s $106.50. Therefore we see a good entry point into PPG's stock at $95.90 or below. We expect the stock of PPG to pull back from current levels in coming weeks and months to more realistic valuation levels closer to our target (full value) price for PPG Industries as we do believe the stock cannot hold on to its current valuation levels.
Next earnings release of PPG Industries
It is expected that PPG Industries will release their Q1 2020 earnings in late April 2020