Here’s Why PPG Industries Fell 9% On Friday – NYSE: PPG

PPG Industries (NYSE:PPG) 4Q16 earnings; Beats Street View

Shares of PPG Industries (NYSE: PPG), a manufacturer and distributor of coatings, specialty materials and glass products, saw its stock lose more than 9 percent on Friday after the company provided an update to its outlook.

PPG Industries said that it expects to earn $1.54 to $1.57 per share in its fiscal third quarter on revenue of around $3.8 billion.  Both figures fell short of the $1.71 per share and $3.84 billion Wall Street analysts were expecting.

The company noted that its earnings per share for the third quarter factors in improvements in its global volume growth rate and increased spending on initiatives to spur growth.  In fact, sales volume grew more than 1.5 percent on a year-over-year basis despite a slower than expected growth profile in Europe.

However, the company also acknowledged it is not satisfied with the third quarter’s earnings per share which is characterized by a “sluggish” economic environment and no clear near-term catalyst or sign of an improving global GDP Growth.

Looking forward the company pledged to explore any actions that could reduce its overall cost structure through cost improvements and targeted regional actions where economic conditions are the weakest.  The new plan is on top of an already announced restructuring program.  Meanwhile, the company will also maintain “appropriate” spending on initiatives to support organic growth.

In addition, PPG expects to spend around $2.5 billion in earnings accretive activities, including acquisitions and share repurchases.  In fact the company simultaneously announced a $2 billion share repurchase program which will be added to an already existing program that has around $520 million remaining.

During the third quarter the company deployed approximately $1.85 billion of cash on acquisitions and share buybacks.

Friday’s large sell-off in PPG’s stock erased all of the gains it made throughout 2016.  Shares are now lower by nearly 6 percent since the start of the new year and are also nearly flat over the past year.
PPG’s earnings guidance resulted in heavy selling across its peers.  For instance, shares of Axalta Coating Systems (NYSE: AXTA), a manufacturer of coatings systems, saw its shares trade lower by nearly 5 percent.  Similarly, Axalta’s stock is barely trading in positive territory since the start of 2016 and are lower by more than 2 percent over the past year.