1. No category

November 9, 2014
NYSE: PPG
PPG INDUSTRIES INC
BUY
A+
A
A-
HOLD
B+
B
Annual Dividend Rate
$2.68
B-
C+
C
Annual Dividend Yield
1.30%
SELL
C-
D
Beta
1.24
Sector: Materials
PPG BUSINESS DESCRIPTION
PPG Industries, Inc. manufactures and distributes
coatings, optical and specialty materials, and glass
products. The company operates in five segments:
Performance Coatings, Industrial Coatings,
Architectural Coatings, Optical and Specialty
Materials, and Glass.
D+
D-
E+
E
E-
F
Market Capitalization
$28.3 Billion
Sub-Industry: Specialty Chemicals
Weekly Price: (US$)
SMA (50)
BUY
52-Week Range
$171.56-$213.01
RATING SINCE
TARGET PRICE
05/18/2010
$266.62
Price as of 11/6/2014
$206.09
Source: S&P
SMA (100)
1 Year
2 Years
275
TARGET
TARGET
TARGETPRICE
PRICE$266.62
$266.62
PRICE
$266.62
TARGET
250
225
200
175
STOCK PERFORMANCE (%)
3 Mo.
Price Change
3.62
1 Yr.
12.74
3 Yr (Ann)
32.54
150
125
GROWTH (%)
Last Qtr
4.26
64.15
91.48
Revenues
Net Income
EPS
12 Mo.
9.61
-29.06
51.14
3 Yr CAGR
1.35
27.99
11.24
100
Rating History
BUY
Volume in Millions
50
RETURN ON EQUITY (%)
PPG
21.25
17.34
19.45
Q3 2014
Q3 2013
Q3 2012
Ind Avg
27.69
22.71
22.49
S&P 500
14.28
13.75
13.93
25
2012
2013
0
2014
COMPUSTAT for Price and Volume, TheStreet Ratings, Inc. for Rating History
RECOMMENDATION
We rate PPG INDUSTRIES INC (PPG) a BUY. This is based on the convergence of positive investment
measures, which should help this stock outperform the majority of stocks that we rate. The company's
strengths can be seen in multiple areas, such as its increase in stock price during the past year, impressive
record of earnings per share growth, increase in net income, revenue growth and largely solid financial
position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the
company shows weak operating cash flow.
P/E COMPARISON
22.28
37.61
19.70
PPG
Ind Avg
S&P 500
HIGHLIGHTS
Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the
market's overall trend during that period and the fact that the company's earnings growth has been robust.
Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock,
despite the fact that it has already risen over the past year.
2012
2013
Q3 2.70
Q2 2.80
Q1 1.97
Q4 1.78
Q3 1.41
Q2 2.19
Q1 1.29
Q4 1.23
Q3 1.86
PPG INDUSTRIES INC reported significant earnings per share improvement in the most recent quarter
compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per
share growth over the past year. We feel that this trend should continue. During the past fiscal year, PPG
INDUSTRIES INC increased its bottom line by earning $6.67 versus $4.69 in the prior year. This year, the
market expects an improvement in earnings ($9.60 versus $6.67).
Q2 1.92
Q1 -0.32
EPS ANALYSIS¹ ($)
The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500
and the Chemicals industry. The net income increased by 64.2% when compared to the same quarter one
year prior, rising from $226.00 million to $371.00 million.
2014
NA = not available NM = not meaningful
1 Compustat fiscal year convention is used for all fundamental
data items.
Despite its growing revenue, the company underperformed as compared with the industry average of 9.9%.
Since the same quarter one year prior, revenues slightly increased by 4.3%. Growth in the company's revenue
appears to have helped boost the earnings per share.
The current debt-to-equity ratio, 0.55, is low and is below the industry average, implying that there has been
successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains
an adequate quick ratio of 1.23, which illustrates the ability to avoid short-term cash problems.
This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy
or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2014. All rights reserved.
Report Date: November 9, 2014
PAGE 1
November 9, 2014
NYSE: PPG
PPG INDUSTRIES INC
Sector: Materials Specialty Chemicals Source: S&P
Annual Dividend Rate
$2.68
Annual Dividend Yield
1.30%
PEER GROUP ANALYSIS
12%
SHW ECL
V
FA
-8%
LE
AB
-5%
35%
EBITDA Margin (TTM)
Companies with higher EBITDA margins and
revenue growth rates are outperforming companies
with lower EBITDA margins and revenue growth
rates. Companies for this scatter plot have a market
capitalization between $5.6 Billion and $33.6 Billion.
Companies with NA or NM values do not appear.
*EBITDA – Earnings Before Interest, Taxes, Depreciation and
Amortization.
12%
REVENUE GROWTH AND EARNINGS YIELD
AB
OR
LE
RPM
V
FA
ECL SHW
VAL PPG
CE
LE
AB
-8%
Global annual plastics consumption is in excess of 180 million metric tons. Total world plastic materials
consumption is forecasted to double by 2015 from 2003 levels, with annual demand growth of more than 5%.
This is due to growing global demand for processed foods and beverages, which implies higher demand for
packaging materials. Demand is expected to come from multiple industries as manufacturers across business
lines switch to lighter and more durable plastic alternatives.
The industry is the second-largest consumer of energy and efforts are underway to improve efficiency. ACC
reported that the energy consumption per unit of output has declined by nearly half since 1974. Apart from
energy consumption, there is growing concern about excessive usage of non-biodegradable plastic bags. In
the US alone, plastic bags form a $4 billion industry, with about 110 billion units used yearly. Such
environmental concerns and an increased focus on sustainable development are driving extensive
application of technology to produce biodegradable alternatives. Another area of focus is nanotechnology,
which is being employed in the development of composites, coatings, and specialty materials.
Looking ahead, the chemicals industry is expected to recover along with the overall economic condition.
However, high crude oil prices may raise production costs and lackluster demand in emerging economies
may offset certain positives. The industry may see increased consolidation due to intense competition, the
need for cost efficiencies, and economies of scale.
R
VO
FA
ASH
The correlation with other industries is high. For example, the severe construction downturn has adversely
impacted demand for insulation, plastic pipes, paints, windows, and hundreds of other basic building
materials.
The industry is evolving and manufacturers are moving up the value chain by including engineering, design,
and logistics support services, in addition to core manufacturing. In order to improve margins, chemical
companies are looking at outsourcing and off-shoring options.
UN
Revenue Growth (TTM)
IFF
ROC
GRA
SIAL
0%
Price as of 11/6/2014
$206.09
The industry is capital-intensive. The industry annually spends roughly $50 billion on research and
development. The industry is cyclical and affected by costs for basic commodities, especially oil and gas.
Price fluctuations impact dependent industries such as resins, plastics, synthetic fibers, pesticides,
lubricants, paints, coatings, adhesives, soaps and cleaners, pharmaceuticals, and many other products with
special applications.
R
VO
FA
ASH
52-Week Range
$171.56-$213.01
The industry includes around 10,000 companies. Major publically-traded players are Dow Chemical Company
(DOW), Monsanto (MON), DuPont (DD), Potash (POT), Huntsman (HUN), and LyondellBasell Industries (LYB).
According to the American Chemistry Council, or ACC, the industry is a $689 billion enterprise in the US,
employing over 850 thousand people.
ROC
IFF
GRA SIAL
UN
Revenue Growth (TTM)
RPM
LE
CE
AB
OR
PPG
Market Capitalization
$28.3 Billion
INDUSTRY ANALYSIS
The chemicals industry is comprised of companies that produce commodity chemicals, diversified chemicals,
fertilizers and agricultural chemicals, industrial gases, and specialty chemicals. The industry is concentrated
in areas where a few large manufacturers hold significant market share. The larger manufactures benefit
from supply chain integration and economies of scale, whereas smaller manufacturers utilize product
specialization and efficient operations in order to compete.
REVENUE GROWTH AND EBITDA MARGIN*
VAL
Beta
1.24
15%
Earnings Yield (TTM)
Companies that exhibit both a high earnings yield
and high revenue growth are generally more
attractive than companies with low revenue growth
and low earnings yield. Companies for this scatter
plot have revenue growth rates between -6.3% and
11.1%. Companies with NA or NM values do not
appear.
PEER GROUP: Chemicals
Ticker
PPG
CE
ASH
IFF
GRA
VAL
RPM
ROC
ECL
SHW
SIAL
Company Name
PPG INDUSTRIES INC
CELANESE CORP
ASHLAND INC
INTL FLAVORS & FRAGRANCES
GRACE (W R) & CO
VALSPAR CORP
RPM INTERNATIONAL INC
ROCKWOOD HOLDINGS INC
ECOLAB INC
SHERWIN-WILLIAMS CO
SIGMA-ALDRICH CORP
Recent
Price ($)
206.09
59.55
108.71
98.94
95.35
83.88
46.17
78.46
111.94
233.22
135.34
Market
Cap ($M)
28,283
9,149
8,485
8,011
7,076
6,950
6,163
5,590
33,595
22,389
16,118
This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy
or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2014. All rights reserved.
Price/
Earnings
22.28
6.82
120.79
21.01
25.22
24.24
21.68
45.88
29.77
27.21
32.69
Net Sales
TTM ($M)
15,355.00
6,859.00
6,121.00
3,057.62
3,215.60
4,397.66
4,415.58
1,420.10
14,159.20
11,017.18
2,764.00
Net Income
TTM ($M)
2,273.00
1,362.00
233.00
385.89
290.50
300.86
287.64
611.60
1,154.40
849.27
498.00
Report Date: November 9, 2014
PAGE 2
November 9, 2014
NYSE: PPG
PPG INDUSTRIES INC
Sector: Materials Specialty Chemicals Source: S&P
Annual Dividend Rate
$2.68
Annual Dividend Yield
1.30%
COMPANY DESCRIPTION
PPG Industries, Inc. manufactures and distributes
coatings, optical and specialty materials, and glass
products. The company operates in five segments:
Performance Coatings, Industrial Coatings, Architectural
Coatings, Optical and Specialty Materials, and Glass. It
offers coatings products for automotive and commercial
transport/fleet repair and refurbishing, light industrial
coatings, and specialty coatings for signs; sealants,
coatings, maintenance cleaners, and transparencies for
commercial, military, regional jet, and general aviation
aircraft and transparent armor for specialty applications;
and coatings and finishes for the protection of metals
and structures to metal fabricators, heavy duty
maintenance contractors, and manufacturers of ships,
bridges, and rail cars. The company also provides
industrial and automotive coatings for manufacturing
companies; adhesives and sealants for the automotive
industry; metal pretreatments and related chemicals for
industrial and automotive applications; and packaging
coatings to aerosol, food, and beverage container
manufacturers. In addition, it offers architectural
coatings used by painting and maintenance contractors
and by consumers to decorate and maintain residential
and commercial building structures, as well as purchased
sundries to painting contractors and consumers. Further,
the company provides optical products, such as lenses,
optical lens materials, and sun lenses; silicas comprising
amorphous precipitated silicas for tire, battery separator,
and other end-use markets; and substrates used for radio
frequency identification tags and labels, e-passports,
drivers' licenses, and identification cards applications.
Additionally, it offers flat glass and continuous-strand
fiber glass products for commercial and residential
construction markets, and the wind energy, energy
infrastructure, transportation, and electronics industries.
The company was founded in 1883 and is headquartered
in Pittsburgh, Pennsylvania.
PPG INDUSTRIES INC
One PPG Place
Pittsburgh, PA 15272
USA
Phone: 412-434-3131
http://www.ppg.com
Beta
1.24
Market Capitalization
$28.3 Billion
52-Week Range
$171.56-$213.01
Price as of 11/6/2014
$206.09
STOCK-AT-A-GLANCE
Below is a summary of the major fundamental and technical factors we consider when determining our
overall recommendation of PPG shares. It is provided in order to give you a deeper understanding of our
rating methodology as well as to paint a more complete picture of a stock's strengths and weaknesses. It is
important to note, however, that these factors only tell part of the story. To gain an even more comprehensive
understanding of our stance on the stock, these factors must be assessed in combination with the stock’s
valuation. Please refer to our Valuation section on page 5 for further information.
FACTOR
SCORE
4.0
Growth
out of 5 stars
weak
Measures the growth of both the company's income statement and
cash flow. On this factor, PPG has a growth score better than 70% of the
stocks we rate.
strong
3.5
Total Return
out of 5 stars
weak
Measures the historical price movement of the stock. The stock
performance of this company has beaten 60% of the companies we
cover.
strong
5.0
Efficiency
out of 5 stars
weak
Measures the strength and historic growth of a company's return on
invested capital. The company has generated more income per dollar of
capital than 90% of the companies we review.
strong
4.0
Price volatility
out of 5 stars
weak
Measures the volatility of the company's stock price historically. The
stock is less volatile than 70% of the stocks we monitor.
strong
5.0
Solvency
out of 5 stars
weak
Measures the solvency of the company based on several ratios. The
company is more solvent than 90% of the companies we analyze.
strong
3.5
Income
out of 5 stars
weak
Measures dividend yield and payouts to shareholders. The company's
dividend is higher than 60% of the companies we track.
strong
THESTREET RATINGS RESEARCH METHODOLOGY
TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both
price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to
perform against a general benchmark of the equities market and interest rates. While our model is
quantitative, it utilizes both subjective and objective elements. For instance, subjective elements include
expected equities market returns, future interest rates, implied industry outlook and forecasted company
earnings. Objective elements include volatility of past operating revenues, financial strength, and company
cash flows.
Our model gauges the relationship between risk and reward in several ways, including: the pricing drawdown
as compared to potential profit volatility, i.e.how much one is willing to risk in order to earn profits; the level of
acceptable volatility for highly performing stocks; the current valuation as compared to projected earnings
growth; and the financial strength of the underlying company as compared to its stock's valuation as
compared to projected earnings growth; and the financial strength of the underlying company as compared
to its stock's performance. These and many more derived observations are then combined, ranked, weighted,
and scenario-tested to create a more complete analysis. The result is a systematic and disciplined method of
selecting stocks.
This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy
or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2014. All rights reserved.
Report Date: November 9, 2014
PAGE 3
November 9, 2014
NYSE: PPG
PPG INDUSTRIES INC
Sector: Materials Specialty Chemicals Source: S&P
Annual Dividend Rate
$2.68
Annual Dividend Yield
1.30%
Consensus EPS Estimates² ($)
IBES consensus estimates are provided by Thomson Financial
1.97
9.60 E
11.17 E
Q4 FY14
2014(E)
2015(E)
INCOME STATEMENT
Net Sales ($mil)
EBITDA ($mil)
EBIT ($mil)
Net Income ($mil)
Q3 FY14
3,935.00
651.00
532.00
371.00
Q3 FY13
3,774.00
592.00
479.00
226.00
Q3 FY14
3,038.00
17,087.00
3,348.00
6,121.00
Q3 FY13
2,249.00
16,638.00
3,395.00
5,211.00
Q3 FY14
43.35%
16.54%
13.52%
0.90
13.30%
21.25%
Q3 FY13
42.74%
15.68%
12.69%
0.84
19.25%
17.34%
Q3 FY14
1.82
0.35
51.00
10.43
Q3 FY13
1.86
0.39
50.00
9.58
Q3 FY14
137
0.67
2.70
44.60
NA
809,035
Q3 FY13
142
0.61
1.41
36.69
NA
553,787
Beta
1.24
Market Capitalization
$28.3 Billion
52-Week Range
$171.56-$213.01
Price as of 11/6/2014
$206.09
FINANCIAL ANALYSIS
PPG INDUSTRIES INC's gross profit margin for the third quarter of its fiscal year 2014 is essentially
unchanged when compared to the same period a year ago. The company has grown its sales and net income
during the past quarter when compared with the same quarter a year ago, and although its growth in net
income has outpaced the industry average, its revenue growth has not. PPG INDUSTRIES INC has average
liquidity. Currently, the Quick Ratio is 1.23 which shows that technically this company has the ability to cover
short-term cash needs. The company's liquidity has decreased from the same period last year, indicating
deteriorating cash flow.
During the same period, stockholders' equity ("net worth") has increased by 17.46% from the same quarter last
year. Together, the key liquidity measurements indicate that it is relatively unlikely that the company will face
financial difficulties in the near future.
STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the
next 12-months. To learn more visit www.TheStreetRatings.com.
BALANCE SHEET
Cash & Equiv. ($mil)
Total Assets ($mil)
Total Debt ($mil)
Equity ($mil)
PROFITABILITY
Gross Profit Margin
EBITDA Margin
Operating Margin
Sales Turnover
Return on Assets
Return on Equity
DEBT
Current Ratio
Debt/Capital
Interest Expense
Interest Coverage
SHARE DATA
Shares outstanding (mil)
Div / share
EPS
Book value / share
Institutional Own %
Avg Daily Volume
2 Sum of quarterly figures may not match annual estimates due to
use of median consensus estimates.
This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy
or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2014. All rights reserved.
Report Date: November 9, 2014
PAGE 4
November 9, 2014
NYSE: PPG
PPG INDUSTRIES INC
Sector: Materials Specialty Chemicals Source: S&P
Annual Dividend Rate
$2.68
Annual Dividend Yield
1.30%
RATINGS HISTORY
Our rating for PPG INDUSTRIES INC has not
changed since 5/18/2010. As of 11/6/2014, the stock
was trading at a price of $206.09 which is 3.3%
below its 52-week high of $213.01 and 20.1% above
its 52-week low of $171.56.
2 Year Chart
Beta
1.24
Market Capitalization
$28.3 Billion
BUY: $123.19
Price/Earnings
1
2
3
premium
$150
4
5
PPG 22.28
Peers 37.61
• Discount. A lower P/E ratio than its peers can
signify a less expensive stock or lower growth
expectations.
• PPG is trading at a significant discount to its peers.
Price/Projected Earnings
From
Buy
To
Buy
RATINGS DEFINITIONS &
DISTRIBUTION OF THESTREET RATINGS
3
49.24% Buy - We believe that this stock has the
opportunity to appreciate and produce a total return of
more than 10% over the next 12 months.
29.51% Hold - We do not believe this stock offers
conclusive evidence to warrant the purchase or sale of
shares at this time and that its likelihood of positive total
return is roughly in balance with the risk of loss.
21.25% Sell - We believe that this stock is likely to
decline by more than 10% over the next 12 months, with
the risk involved too great to compensate for any
possible returns.
4
5
Price/Book
1
2
3
premium
4
5
Price/Sales
1
2
premium
3
4
5
Price to Earnings/Growth
4
5
discount
1
2
3
premium
4
5
discount
PPG 0.64
Peers 1.55
• Discount. The PEG ratio is the stock’s P/E divided
by the consensus estimate of long-term earnings
growth. Faster growth can justify higher price
multiples.
• PPG trades at a significant discount to its peers.
Earnings Growth
1
2
3
4
lower
5
higher
PPG 51.14
Peers 51.36
• Average. Elevated earnings growth rates can lead
to capital appreciation and justify higher
price-to-earnings ratios.
• PPG is expected to keep pace with its peers on the
basis of earnings growth.
Sales Growth
discount
PPG 1.84
Peers 2.28
• Discount. In the absence of P/E and P/B multiples,
the price-to-sales ratio can display the value
investors are placing on each dollar of sales.
• PPG is trading at a discount to its industry on this
measurement.
3
PPG 18.00
Peers 15.01
• Premium. The P/CF ratio, a stock’s price divided by
the company's cash flow from operations, is useful
for comparing companies with different capital
requirements or financing structures.
• PPG is trading at a premium to its peers.
discount
PPG 4.62
Peers 4.58
• Average. A lower price-to-book ratio makes a stock
more attractive to investors seeking stocks with
lower market values per dollar of equity on the
balance sheet.
• PPG is trading at a valuation on par with its peers.
2
premium
discount
PPG 18.45
Peers 19.06
• Premium. A higher price-to-projected earnings ratio
than its peers can signify a more expensive stock
or higher future growth expectations.
• PPG is trading at a premium to its peers.
(as of 11/6/2014)
Research Contact: 212-321-5381
Sales Contact: 866-321-8726
2
premium
Price reflects the closing price as of the date listed, if available
TheStreet Ratings
14 Wall Street, 15th Floor
New York, NY 10005
www.thestreet.com
1
1
Price/CashFlow
discount
2013
MOST RECENT RATINGS CHANGES
Date
Price
Action
11/6/12
$123.19 No Change
Price as of 11/6/2014
$206.09
VALUATION
BUY. This stock's P/E ratio indicates a significant discount compared to an average of 37.61 for the
Chemicals industry and a premium compared to the S&P 500 average of 19.70. Conducting a second
comparison, its price-to-book ratio of 4.62 indicates a significant premium versus the S&P 500 average of 2.72
and a premium versus the industry average of 4.58. The current price-to-sales ratio is similar to the S&P 500
average, but it is below the industry average, indicating a discount. The valuation analysis reveals that, PPG
INDUSTRIES INC seems to be trading at a discount to investment alternatives within the industry.
$250
$200
52-Week Range
$171.56-$213.01
1
2
3
lower
4
5
higher
PPG 9.61
Peers 3.54
• Higher. A sales growth rate that exceeds the
industry implies that a company is gaining market
share.
• PPG has a sales growth rate that significantly
exceeds its peers.
DISCLAIMER:
The opinions and information contained herein have been obtained or derived from sources believed to be reliable, but
TheStreet Ratings cannot guarantee its accuracy and completeness, and that of the opinions based thereon. Data is provided
via the COMPUSTAT® Xpressfeed product from Standard &Poor's, a division of The McGraw-Hill Companies, Inc., as well as
other third-party data providers.
TheStreet Ratings is a division of TheStreet, Inc., which is a publisher. This research report contains opinions and is provided
for informational purposes only. You should not rely solely upon the research herein for purposes of transacting securities or
other investments, and you are encouraged to conduct your own research and due diligence, and to seek the advice of a
qualified securities professional, before you make any investment. None of the information contained in this report constitutes,
or is intended to constitute a recommendation by TheStreet Ratings of any particular security or trading strategy or a
determination by TheStreet Ratings that any security or trading strategy is suitable for any specific person. To the extent any of
the information contained herein may be deemed to be investment advice, such information is impersonal and not tailored to the
investment needs of any specific person. Your use of this report is governed by TheStreet, Inc.'s Terms of Use found at
http://www.thestreet.com/static/about/terms-of-use.html.
This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy
or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2014. All rights reserved.
Report Date: November 9, 2014
PAGE 5