PPG Industries, Inc. (PPG) reported impressive third-quarter 2023 results, with a profit of $426 million or $1.79 per share, compared to $329 million or $1.39 per share in the same quarter of the previous year. Adjusted earnings per share, excluding one-time items, increased to $2.07 from $1.66 in the year-ago quarter, surpassing the Zacks Consensus Estimate of $1.95.
The company’s revenues for the quarter were $4,644 million, a 4% increase year over year, driven by higher selling prices. The top line also exceeded the Zacks Consensus Estimate of $4,620.8 million.
The aggregate segment margin grew by 260 basis points from the year-ago quarter, marking the fourth consecutive quarter of year-over-year margin growth.
Segment Review
In the Performance Coatings segment, revenues rose by 6% to $2,880 million, surpassing the estimate of $2,765.9 million. This increase was mainly due to favorable foreign exchange swings and higher selling prices. Segment income also climbed by 25% year over year, primarily driven by higher selling prices and moderating input costs. Segment operating margins experienced a growth of 230 basis points compared to the third quarter of 2022.
In the Industrial Coatings segment, revenues remained flat year over year at $1,764 million. Although sales volumes decreased, higher selling prices, net benefits from acquisitions and divestitures, and positive foreign currency translation offset the decline. Segment income increased by 28% compared to the previous year, driven by higher selling prices and lower raw material costs. Segment margins grew by 300 basis points from the third quarter of 2022.
Financials
PPG had approximately $1.3 billion in cash and short-term investments at the end of the third quarter. The net debt decreased by nearly $800 million from the prior-year quarter.
In the third quarter, the company generated around $15 million in incremental cost savings through acquisition-related synergies and company restructuring activities.
Outlook
PPG expects total organic sales to either increase or decrease by a low single-digit percentage in the fourth quarter. The projected adjusted EPS for the fourth quarter is in the range of $1.44-$1.50, and the adjusted EPS projection for the full year has been raised to $7.58-$7.64.
Price Performance
Over the past year, PPG Industries shares have risen by 17.9% compared to the industry’s growth of 17.5%.
Zacks Rank & Key Picks
PPG currently holds a Zacks Rank #3 (Hold). Some better-ranked stocks in the basic materials space include Equinox Gold Corp. (EQX), Koppers Holdings Inc. (KOP), and The Andersons Inc. (ANDE).
Equinox Gold Corp. has a projected earnings growth rate of 90% for the current year and a Zacks Rank #1 (Strong Buy). Koppers Holdings Inc. has a projected earnings growth rate of 7.5% for the current year and a Zacks Rank #2 (Buy). The Andersons Inc. currently holds a Zacks Rank #2.
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