PPG Industries Impact Update from Natural Disasters, 3Q17 Guidance
PPG Industries updates 3Q17 earnings
PPG Industries (PPG) on September 25, 2017, provided an update that will likely impact its 3Q17 earnings due to the hurricanes in the US and the recent earthquakes in Mexico. The impact in Mexico will likely be severe as PPG has a strong presence there, with more than 100 company-owned architectural coating stores and nearly 1,600 concessionaire stores, distribution centers, manufacturing facilities, and administrative offices.
PPG has also confirmed the loss of inventories due to the earthquakes, but the total financial impact is still being assessed.
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PPG’s supply chain of raw materials has been disrupted, and this has had an adverse impact on PPG’s operations. But PPG has said that it’s still committed to its customers and could see an increase in distribution expenses.
PPG is expecting its 3Q17 diluted EPS (earnings per share) to be adversely impacted to the tune of $0.05–$0.10.
PPG Chairman and CEO (chief executive officer) Michael McGarry stated: “Excluding the unfavorable impacts from the hurricanes and the earthquakes, our third quarter volume growth rate is expected to be above 1.5 percent, exceeding our growth rate for the first half [of] 2017.”
PPG’s stock performance
PPG stock remained flat last week, with a marginal decline of 0.1%, and closed at $108.66. Although the stock declined, PPG was trading 1.2% above its 100-day moving average price of $107.35, indicating an upward trend.
Analysts project that PPG’s 12-month target price will be at $115.50, implying a return potential of 6.3% from the closing price as of September 29, 2017. Peers Sherwin-Williams (SHW) and RPM International (RPM) gained 2.4% and 0.7%, respectively, in the week ended September 29, 2017, while Axalta (AXTA) fell 0.40%.
Notably, investors can indirectly hold PPG by investing in the Materials Select Sector SPDR Fund (XLB), which had 4.5% of its portfolio in PPG Industries as of September 29.