SHECY Shin Etsu Chemical Company Ltd (PK)

PPG Industries (PPG) touched a new 52-week high of $158.89 on May 17, higher than its previous high of $157.85. Its shares rose $3.29 (or 2.1%) to clock $158.84 at the end of the trading session on that day.

The Pittsburgh-based coatings giant, which has a market cap of roughly $22.7 billion, has seen its share price improve roughly 18% year-to-date and 66% over a year. Average volume of shares traded over the last three months is around 1,104K. The stock, which broke above its 200-day moving average in late 2011, continues to rally upward (with minor retracements) and trade incessantly above it, manifesting the bullish trend.

What’s Driving PPG Up?

Shares of PPG Industries are heading higher following its healthy first-quarter 2013 results, reported on Apr 18. Its profit for the quarter climbed manifold on strength across automotive OEM and aerospace markets. A one-time gain on sale of PPG Industries’ commodity chemicals business also boosted the bottom line.

Adjusted earnings of $1.58 per share beat the Zacks Consensus Estimate of $1.56. Strong momentum across North America and Asia aided the results.

PPG Industries has a diversified business, both in terms of products offered and geographical presence. It has a leading position in several paints and coatings end markets.

PPG Industries is taking steps to grow its business inorganically by making a number of acquisitions. The recent $1.05 billion acquisition of the North American architectural coatings business of Dutch paints company, AkzoNobel, N.V. (AKZOY), has expanded PPG Industries’ branded paint product offerings and scale in the North American architectural paint market. The company is poised to realize attractive synergies from the buyout.

Moreover, PPG Industries is pursuing restructuring of its European operation, which is expected to fetch meaningful cost savings this year. It also has an impressive record of returning cash to shareholders through dividends and share buybacks. Its board, in Apr 2013, approved a raise of 2 cents per share in the quarterly dividend to 61 cents per share. The dividend increase represents a testimony of the company’s healthy balance sheet.

That said, we account for the softness in Europe and a challenging demand environment in the region. Moreover, raw material inflation and currency headwinds remain concerns for PPG Industries. As such, the stock currently carries a Zacks Rank #3 (Hold).

 
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