Welcome to the Stock of the Day.
The latest winner to come out of earnings season is PPG Industries (PPG), which reported strong first-quarter results this morning. Is there further upside from here for the paints and coatings specialist?
Find out now.
PPG Industries supplies paints and coatings. PPG has several key businesses outside of performance coatings, including adhesives, commodity chemicals and fiber glass. PPG Industries also produces paints and stains for commercial and residential markets, but the bulk of this company’s products are designed for aerospace, automotive, defense and industrial applications.
When it comes to sales and earnings growth, the analyst community is optimistic for the remainder of 2014. The consensus estimate currently calls for 2.2% annual sales growth and 13.3% earnings growth. But with the latest quarterly results hot off the press, we could very well see these estimates revised higher before long.
PPG stock rose at today’s open after it announced that it earned $277 million, or $1.97 per diluted share, on $3.6 billion in sales for the first quarter. Compared with the year ago period this works out to 45% bottom-line growth and 17% top-line growth. Adjusted earnings were $1.98 per share, which beat the $1.87 EPS estimate by nearly 6%.Notably, PPG Industries achieved the highest year-on-year volume growth in three years and record earnings in each major region.
In addition to the strong quarterly results, PPG made two announcements that made shareholders very happy. First, the company authorized a new $2 billion share repurchase program. This is on top of the $200 million remaining on its previous stock buyback program. On top of this, the company approved a 10% hike to its quarterly dividend. PPG stock shareholders of record on May 12 will be paid 67 cents per share on June 12.
All-in-all, this was a very strong earnings report.
Before you buy any stock, you should always run it through my free Portfolio Grader ratings system.
PPG has spent much of the past year in buy territory, with just a brief stint as a hold in December and January. Right now, the PPG stock is still a great candidate for new money, earning Bs for both its Quantitative Grade (a measure of the stock’s risk-to-return ratio) and its Fundamental Grade.
On the fundamentals side, PPG earns Bs on four of the eight metrics I graded it on (sales growth, operating margin growth, earnings growth and analyst earnings revisions). It receives an A on return on equity. The only areas it needs to improve are its track record of earnings surprises (C), cash flow (C) and earnings momentum (F).
Bottom Line: As of this posting I still consider PPG stock a B-rated Buy.