PPG Industries (PPG) Tops Q3 EPS by 1c, Revenues Beat

PPG Industries (NYSE: PPG) reported Q3 EPS of $1.93, $0.01 better than the analyst estimate of $1.92. Revenue for the quarter came in at $3.7 billion versus the consensus estimate of $3.65 billion.

• Net sales of about $3.7 billion, 4% lower than the prior year
• Net sales continued to be impacted by the economic effects of the COVID-19 pandemic
• Record reported earnings per diluted share from continuing operations (EPS) of $1.86 and adjusted EPS of $1.93
• Strong aggregate segment operating margins compared to the third quarter 2019, supported by sales volume recovery and ongoing cost management actions
• Quarterly operating cash flow generation of more than $800 million; higher than third quarter 2019

“As reported earlier this month, we delivered record operating results in the third quarter, with both of our reportable business segments delivering higher segment income than the prior year, despite continued, negative pandemic-related economic effects,” said Michael H. McGarry, PPG chairman and chief executive officer. “Strong year-over-year organic sales growth in global architectural coatings and continued cost management drove earnings growth in our Performance Coatings reporting segment. In addition, our leading technology and service capabilities benefited us as demand for automotive OEM coatings and general industrial coatings began recovering in the quarter, generating strong PPG operating leverage and boosting earnings in our Industrial Coatings reporting segment.

“In aggregate, we delivered operating margins that were about 300 basis points higher than the prior year. Our continued execution of both interim and structural cost-savings initiatives is driving higher incremental earnings on improving sales volumes. In the quarter, we delivered about $90 million of cost savings from various interim initiatives and about $35 million of incremental structural savings from business restructuring programs, including the execution of some manufacturing footprint optimization initiatives. In addition to our earnings performance, we generated more than $800 million of cash from operations in the quarter, including the benefit of a 150-basis-point reduction in working capital as a percent of sales versus the third quarter 2019.

“Looking ahead, we are likely to experience normal seasonal trends in the fourth quarter, especially in our European and North American architectural coatings businesses,” McGarry added. “Even with the continued uncertainty from the pandemic we expect overall economic activity to continue to recover, but in an uneven manner. The pandemic is still significantly impacting the demand for certain coatings products – most notably, global commercial aerospace, marine, and protective coatings that support the oil and gas industry. In addition, we expect that automotive refinish coatings demand in the U.S. and Europe will remain below 2019 levels until there is a return to more normal commuting patterns. We remain well positioned to capture additional incremental earnings growth once these sectors, that represent about 30% of our business portfolio, begin to recover. Similar to the past several quarters, we will continue to focus on execution against all elements within our control. Also, the company’s balance sheet remains strong, and we are evaluating earnings-accretive cash deployment alternatives.

“We will continue to prioritize the health and safety of our employees, while providing excellent support to our customers with our technology-advantaged products. I am very proud of the entire global PPG team, and I want to thank everyone for their continued focus and diligence during these challenging times. As I said last quarter, I remain confident that we are on the path to emerge from this crisis as an even stronger company, and these record quarterly results lay the foundation for delivering on this commitment,” McGarry concluded.

For earnings history and earnings-related data on PPG Industries (PPG) click here.

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