Why Analysts Are Expecting PPG Industries’ Revenues to Fall in 3Q17



Analysts’ revenue expectations for PPG in 3Q17

As of October 10, 2017, analysts expect PPG Industries (PPG) to post revenues of $3.75 billion in 3Q17, which would be a decline of 1.1% over the previous year. In 3Q16, PPG reported revenues of $3.81 billion.

In 2Q17, PPG’s revenues fell short of the analysts’ expectations. It remains to be seen if PPG can beat the analysts’ expectations in its upcoming 3Q17 earnings.

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Why PPG’s revenues could fall in 3Q17

The expected decline in PPG’s revenues has been primarily driven by estimations of how PPG’s exit from the glass business. In 3Q16, PPG’s Glass Segment had reported revenues of $129 million. The recent earthquakes in Mexico and the hurricanes in the US and the Gulf of Mexico are expected to have an adverse impact on revenues.

In its last update, PPG said that it’s still assessing the financial impact of these disasters, but the losses are expected to be recovered when the damaged sites begin rebuilding activities. But the weakness in the marine industry is expected to keep adversely impacting PPG’s organic growth.

Positive developments

There are few positive developments that could offset PPG’s revenue. PPG has raised the prices of its products to manage increasing raw material costs. The continued weakness in the US dollar could limit the negative foreign currency impact, and PPG is expected to benefit from the acquisition of Crown Group in 2Q17, which should be completed in 3Q17.

Investors can hold PPG Industries indirectly by investing in the iShares US Basic Materials ETF (IYM), which has 4.7% of its portfolio in PPG Industries. Other IYM holdings include Monsanto (MON), Praxair (PX), and Air Products and Chemicals (APD), which have weights of 8.6%, 6.6%, and 5.4%, respectively.


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