This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

PPG Industries Is a Buy Ahead of Second-Quarter Earnings

Stocks in this article: PPG SHW

NEW YORK (TheStreet) -- PPG Industries' (PPG) recent acquisition of Mexico City-based Comex Group for $2.3 billion gives PPG the second largest paint market share in Mexico behind rival Sherwin-Williams (SHW).

Currently, Comex has 3,600 stores compared to Sherwin-Williams' 3,900+ paint stores in Mexico. Sherwin-Williams had initially been set to acquire Comex for $2.34 billion, but the deal was terminated. Given that PPG Industries business is largely in the automotive coating segment, this deal has a higher probability of going through, giving PPG a more diversified business if accepted.

When comparing the large players in the industry, Sherwin-Williams only has PPG Industries beat on two key metrics. Sherwin-Williams trades at a P/E ratio of 19.33x (2015 estimates) with 23.6% EPS growth, price to sales ratio of 1.93x, price to book ratio of 12.09x, and has 6.8% revenue growth (9.3% this year). This compares to PPG Industries' P/E ratio of 18.72x (2015 estimates) with 17.7% EPS growth, price to sales ratio of 1.83x, price to book ratio of 4.79x, and has 8.1% revenue growth (2.1% this year).

>>Twitter, Social Media Stock-Moving News Misses Many Baby Boomers

>>Citigroup's Bad Bank Drives Second-Quarter Profit Despite Mortgage Settlement

Keep in mind these forward estimates don't take into account any financials of Comex. PPG Industries also has the slight edge on the dividend with a current yield of 1.29% compared to Sherwin-Williams' 1.09% dividend yield. Short interest in both companies is relatively low (2.39% for Sherwin-Williams and 0.81% for PPG Industries).

The average analyst price target for PPG Industries shares is $225 (8.16% upside from current levels). The last four analyst price target changes include: Robert W. Baird ($215->$225 on 7/1), JPMorgan ($208->$225 on 7/1), Deutsche Bank ($225->$235 on 7/1), and Jefferies ($228->$240 on 6/6).

On April 17, PPG Industries' first-quarter EPS rose over 25% to $1.98 vs. the consensus Wall Street estimate of $1.87. The top line saw improvement as well with revenue rising 17% year over year. The performance coating segment revenue increased 27% to $2.01 billion. The company has beaten the consensus EPS estimates for five straight quarters now.

Following these strong quarters the stock has closed higher on four of the last five days PPG has reported, averaging a 4.32% gain on the four higher closes.  Shares currently trade around $208, up nearly 10% for the year to date.

Call Buyers Sit Tight Ahead of the Upcoming Earnings Report

Ahead of second-quarter earnings Thursday, the buyer of 4,000 July $210 calls for $3.60 each continues to remain long the $1.44 million bet (by far the largest open option position in PPG Industries). This trade from June 11 was part of a rollout from 2,495 July $200 calls for $8.30 each (paid $5.40-$6.70 on 5/28). The big buyer of the July $210 calls has a breakeven of $213.60, if held into July options expiration (2.68% above current levels).

1 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs