PPG Industries (NYSE:PPG) today reported record first quarter 2014 net sales from continuing operations of $3.6 billion, up $528 million, or 17 percent, versus the prior year. First quarter 2014 reported net income from continuing operations was $277 million, or $1.97 per diluted share. First quarter 2014 adjusted net income from continuing operations was $279 million, or $1.98 per diluted share, which excludes $2 million, or 1 cent per diluted share, for acquisition-related costs. First quarter 2013 reported net income and earnings per diluted share from continuing operations were $191 million and $1.29 respectively, and adjusted net income from continuing operations was $207 million, or $1.39 per diluted share, respectively. Nonrecurring after-tax charges were $21 million, or 14 cents per diluted share, for legacy environmental remediation and pension plan settlement costs, and $5 million, or 3 cents per diluted share, for acquisition-related costs. The quarter also included a nonrecurring after-tax benefit of $10 million, or 7 cents per diluted share, for the retroactive impact of U.S. tax law changes enacted in early 2013. A Regulation G Reconciliation of reported to adjusted net income and earnings per diluted share is included below. “We achieved year-over-year global volume growth of 5 percent, our highest level in three years,” said Charles E. Bunch, PPG chairman and chief executive officer. “Additionally, growth rates accelerated in each region versus recent quarters, including in Europe, where our volumes grew 5 percent as we benefited from the early stages of that region’s economic recovery. PPG’s growth was also broad-based across many of our businesses, led by automotive OEM coatings and aerospace, where our performance continued to outpace strong global growth in these end-use markets. “We delivered excellent earnings leverage on the improved demand stemming from the aggressive actions we have taken to significantly reduce our cost structure,” Bunch added. “In addition, our cash deployment over the past several years is contributing to our earnings growth, including achievement of targeted cost synergies from our acquisitions. As a result, our adjusted earnings per share from continuing operations improved by more than 40 percent versus the prior-year figure, aided by earnings improvement in each major region. Also for the quarter, we more than fully replaced the earnings from our recently-divested businesses.”
Jefferies analysts note that recent construction spending data indicates a cycle rotation away from construction-exposed names and toward industrial- and durable goods-levered firms could be playing out.