PPG Industries: Growth Across Different Geographies Is a Catalyst

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Jan 13, 2015

PPG Industries (PPG, Financial) had delivered decent results in the third quarter. The company's business has strengthened on the back of an improvement in sales and volumes. Looking ahead, PPG counts some potential markets such as North America and Asia to be key growth drivers. This is because these markets are showing good improvement, as both the regions improved about 4% on a quarterly basis. Let's take a closer look at the different segments of PPG Industries and see why it is a good investment.

A closer look

PPG is concerned about its growth in the European market. With the down trend in the performance in the past, the European market is now recovering and has shown a slow 1% improvement in the recently reported quarter. Moreover, PPG is mainly excited about its growth opportunities with the important areas where it operates. It is seeing impressive customer adoption of PPG’s leading technologies and this adoption is expected to grow in future. It is also expecting the sales to grow as it is seeing impressive volume growth across aerospace, automotive, OEM coatings and automotive refinish. The growth rate is already high and is expected to soar even higher with the passing quarters.

Moving on, PPG is pleased with the growth it is seeing with industrial and automotive markets. This is also supported by the growing demand in the aerospace industry. However, PPG is quite disappointed by the headwinds it is seeing with the architectural coating volumes. But PPG is delighted to see growth in demand for Architectural Coatings in markets across U.K and Eastern Europe. The profits that the company is receiving from these region are expected to offset the headwinds PPG is seeing in other regions such as France.

In Asia, PPG is also expecting good results in future as well due to volume growth which is also led by improvement in industrial and automotive markets. Moreover, Marine new build volumes are also seeing positive growth now. PPG is counting on this growth as this industry had been struggling in the past and now it has rebound and is expected to rise higher in the coming quarters. PPG is also seeing this segment to be yet another potential area of growth in future.

Conclusion

The stock is currently trading with a trailing P/E of 14.04 which shows that the stock is reasonable and seeing steady improvement, PPG is expected to exhibit good earnings growth in the near term. But in the long term, the company’s earnings are growing at a CAGR of 12.93% which is lower than the industry average of 16.48%. This indicates that, although PPG is putting efforts to perform better, the initiatives are showing good signs but it seems that it will take some more time to come in to its full pace. Until then I would like to suggest the investors to stay away from the stock until it shows concrete signs of gaining market share.