PPG Industries reports its fourth-quarter adjusted EPS
PPG Industries (PPG) announced its fourth-quarter earnings results before the market opened on January 17, 2019. It reported adjusted EPS of $1.15, a fall of ~3.4% over the fourth quarter of 2017. However, it managed to beat analysts’ consensus estimate of $1.10.
PPG’s fall in adjusted EPS was primarily driven by a decrease in its top line and an increase in its cost of goods sold as a percentage of its sales. The price increases in PPG’s products appear to be insufficient to cope with the increase in raw materials prices. As a result, in the fourth quarter, PPG reported a cost of goods sold of $2.18 billion, 60.0% of sales compared to 57.60% of sales in the fourth quarter of 2017. This difference implies an increase of 240 basis points year-over-year.
However, PPG’s adjusted EPS were pushed up by its aggressive share repurchases. During the quarter, PPG bought $400 million worth of shares, bringing the total to ~$1.7 billion for the year. Going forward, its existing shareholders will see more value added to their holdings.
Stock reaction and guidance
On the day of its earnings release, PPG stock rose 4.7% and closed at $107.36. PPG’s peers Sherwin-Williams (SHW), RPM International (RPM), and Axalta Coating Systems (AXTA) rose ~2.0%, 0.9%, and 1.4%, respectively, on the same day.
PPG expects its EPS to be in the range of $1.18–$1.23 in the first quarter of 2019.
The Materials Select Sector SPDR ETF (XLB) has invested 4.4% of its portfolio in PPG Industries.