PPG Industries Inc.’s PPG stock looks promising at the moment. The company’s shares have popped roughly 19% over the past six months. It is benefiting from its cost-saving actions and synergies of acquisitions.
We are positive on the company’s prospects and believe that the time is right for you to add the stock to the portfolio as it looks promising and is poised to carry the momentum ahead.
PPG Industries currently has a Zacks Rank #1 (Strong Buy) and a VGM Score of B. Our research shows that stocks with a VGM Score of A or B, combined with a Zacks Rank #1 or 2 (Buy), offer the best investment opportunities for investors.
Let’s delve deeper into the factors that make this paints giant an attractive choice for investors right now.
Estimates Going Up
Earnings estimate revisions have the greatest impact on stock prices. Over the past two months, the Zacks Consensus Estimate for PPG Industries for the current year has increased around 14.8%. The consensus estimate for 2021 has also been revised 5.2% upward over the same time frame.
Superior Return on Equity (ROE)
PPG Industries’ ROE of 23.9%, as compared with the industry average of 9.6%, manifests the company’s efficiency in utilizing shareholder’s funds.
Cash Deployment
PPG Industries remains committed to boost returns to shareholders leveraging strong cash flows. In July 2020, it raised its quarterly dividend by 6% to 54 cents per share. Notably, PPG Industries has raised its annual dividend payout for 49th straight year. The company paid dividend worth $120 million in the second quarter. It generated around $500 million of cash from operations during the quarter.
Cost Management Initiatives to Boost Margins
PPG Industries is actively managing costs amid a challenging environment due to the coronavirus pandemic. It achieved an interim cost savings of roughly $170 million in the second quarter from its cost mitigation actions. Moreover, the company achieved more than $20 million in cost savings from its restructuring programs in the second quarter.
PPG Industries also expects incremental restructuring savings of $30-$35 million in the third quarter. It sees restructuring savings of $60-$70 million in the second half of 2020.
The company, in June, also approved substantial restructuring actions to lower its global cost structure. The plan includes a voluntary separation program that was offered in the United States and Canada. Upon completion, PPG Industries anticipates the planned actions to offer $160-$170 million in annual pre-tax cost savings.
Acquisitions to Drive Sales
PPG Industries is taking steps to grow business inorganically through strategic acquisitions. The acquisition of specialty materials maker, Dexmet Corporation, has allowed the company to add value to its customers by enhancing product offerings as well as expanding R&D capabilities.
Moreover, the purchase of Industria Chimica Reggiana also complements the company’s current product offerings for the automotive refinish and light industrial coatings industries. Earlier this year, the company also closed the acquisition of Alpha Coating Technologies. Acquisitions are expected to contribute to the company’s top line this year.
PPG Industries, Inc. Price and Consensus
PPG Industries, Inc. price-consensus-chart | PPG Industries, Inc. Quote
Stocks to Consider
Other top-ranked stocks stocks worth considering in the basic materials space include AngloGold Ashanti Limited AU, Barrick Gold Corporation GOLD and Kinross Gold Corporation KGC.
AngloGold Ashanti has a projected earnings growth rate of 124.2% for the current year. The company’s shares have gained roughly 41% in a year. It currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Barrick Gold has a projected earnings growth rate of 80.4% for the current year. The company’s shares have rallied around 69% in a year. It currently has a Zacks Rank #1.
Kinross Gold has an expected earnings growth rate of 100% for the current year. The company’s shares have shot up around 78% in the past year. It currently carries a Zacks Rank #2.
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