On Thursday, KeyBanc Capital Markets maintained its Overweight rating on shares of PPG Industries (NYSE:) with a steady price target of $153.00. The firm’s assessment followed PPG Industries’ release of its third-quarter earnings for 2024, which revealed earnings per share (EPS) of $2.13. This figure fell slightly below the consensus estimate of $2.15 and KeyBanc’s own prediction of $2.14.
The company’s third-quarter performance was bolstered by various non-operational factors, including a lower tax rate, which added approximately $0.06 to the EPS, a reduction in interest expense by about $0.02, and a decrease in corporate expense also by $0.02.
Despite these benefits, the quarter’s results did not fully meet expectations due to operational challenges, particularly a significant shortfall in Industrial margins.
PPG Industries saw a notable increase in its Performance Coatings segment during the third quarter, driven by growth in aerospace, auto refinish, and architectural coatings globally. The Performance Coatings margins exceeded KeyBanc’s forecast by 120 basis points. However, Industrial Coatings margins did not fare as well, falling short by 340 basis points, largely due to decreased volumes in auto OEM and industrial sectors.
The EBITDA for the Industrial segment was below KeyBanc’s estimates. The market had anticipated some weakness in the automotive sector, but the extent of the margin decline in the Industrial segment was greater than expected.
Even though pricing in the Industrial segment remained consistent with the second quarter of 2024, showing a year-over-year decrease of 3%, the margin dropped by 270 basis points quarter-over-quarter.
KeyBanc suggested that while PPG’s portfolio might have experienced some benefits from pricing versus cost, these were obscured by the softer demand in OEM and industrial markets. The firm looks forward to obtaining more details during PPG’s earnings call.
In other recent news, PPG Industries has been at the center of several major developments. The company reported mixed earnings for the third quarter, with earnings per share (EPS) of $2.13, slightly below the estimated $2.15.
However, PPG Industries’ margins exceeded expectations, driven by the Performance Coatings segment, despite weaker sales in the Industrial Coatings segment. Notably, it anticipates its 2024 EPS to be at the lower end of the previously provided range of $8.15 to $8.30.
In a significant move, PPG Industries announced layoffs of 1,800 employees and the closure of various facilities as part of a cost-cutting initiative, aiming to realize annualized pre-tax savings of around $175 million by 2025.
Moreover, the company has agreed to sell its architectural coatings business in the U.S. and Canada to American Industrial Partners for about $550 million, streamlining its operations to focus on core business areas.
Analysts from BMO Capital and Mizuho Securities have maintained their Outperform ratings on PPG Industries, despite the company’s mixed Q3 results. BMO Capital maintains a price target of $160.00, while Mizuho Securities reduced its price target from $160 to $150.
Seaport Global Securities also kept its Buy rating on PPG with a consistent price target of $165.00. These recent developments reflect the ongoing changes and strategic decisions within PPG Industries.
InvestingPro Insights
PPG Industries’ recent performance, as highlighted in KeyBanc’s analysis, can be further contextualized with real-time data from InvestingPro. Despite the slight miss in Q3 earnings, PPG maintains a solid financial foundation. The company’s market capitalization stands at $30.43 billion, reflecting its significant presence in the coatings industry.
An InvestingPro Tip reveals that PPG has raised its dividend for 53 consecutive years, demonstrating a strong commitment to shareholder returns. This is particularly noteworthy given the current dividend yield of 2.09% and a impressive dividend growth rate of 9.68% over the last twelve months. These figures underscore PPG’s financial stability and shareholder-friendly policies, even in the face of operational challenges noted in the KeyBanc report.
Another relevant InvestingPro Tip indicates that PPG has a perfect Piotroski Score of 9, suggesting strong overall financial health. This score aligns with the company’s ability to navigate through the mixed results in its Industrial and Performance Coatings segments.
For investors seeking a deeper dive into PPG’s financials and prospects, InvestingPro offers 6 additional tips, providing a more comprehensive analysis of the company’s position in the market.
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