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Pension Settlement Charges Weighed Heavily on PPG Industries



PPG Industries’ 3Q16 results

PPG Industries (PPG) announced its 3Q16 results on October 20, 2016. It reported revenues of $3.8 billion in 3Q16 compared to $3.7 billion in 3Q15. That’s a rise of 1.7% on a year-over-year basis. Investors were disappointed since it missed analyst estimates.

PPG reported adjusted EPS (earning per share) of $1.56 in 3Q16 compared to $1.54 in 3Q15. That implies a rise of 1.3% on a year-over-year basis.

On a reporting basis, PPG Industries reported a net loss of $0.75 per share, primarily driven by pension settlement charges of $616.0 million.

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The rise in revenues was driven primarily by the acquisitions of MetoKote and IVC Industrial Coatings, which boosted revenues by $75.0 million. In a bid to divest its non-core business, PPG announced the completion of the sale of its European fiberglass and flat glass business in 3Q16. It also divested its 50.0% ownership interest in Asian fiberglass joint ventures. Foreign exchange also proved to be a big challenge for PPG Industries and negatively impacted its revenues.

PPG Industries expects 4Q16 growth rates to be on par with or slightly better than 3Q16.

PPG Industries’ stock buyback

In 3Q16, PPG Industries bought back ~2.4 million shares as part of its $2.0 billion repurchase program approved in 2014. It also announced its fourth-quarter dividend of $0.40, payable on December 12, 2016, with a record date of November 2010. That’s PPG Industries’ 473rd consecutive dividend payment. At the end of 3Q16, its cash and cash equivalents were $929.0 million.

You can get indirect exposure to PPG Industries by investing in the Materials Select Sector SPDR ETF (XLB), which has invested 4.3% of its portfolio in PPG Industries as of November 26, 2016.

The top holdings of XLB include DuPont (DD), Dow Chemical (DOW), and Monsanto (MON), with weights of 11.3%, 11.1%, and 8.2%, respectively, as of November 26, 2016.


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