Estimates Revised, PT lowered
We update our PPG estimates to reflect (1) the previously announced impact of lost sales to Lowes and (2) persistent raw material cost inflation into H118. We forecast Q118 EPS of $1.39, two cents below consensus. For FY18 we lower our EPS forecast from $6.53 to $6.30, largely due to an estimated $0.20/sh FY impact from the lost Lowes business, but also further pressure for Industrial Coatings margins in H1. Our forecasts assume close to $2bn of shares repurchased in H218, which results in higher EPS growth vs. H1, but FY growth still below management's 10% objective (+7%). PPG's valuation at 16x 1YR+ consensus EPS/11x EBITDA is in line with historic relative levels but lingering earnings risk is likely to limit the upside.PPG Industries manufactures and distributes a range of paints, coatings and specialty materials. The company's business is comprised of two reportable business segments: Performance Coatings, which primarily supplies a variety of protective and decorative coatings, sealants and finishes along with paint strippers, stains and related chemicals, as well as transparencies and transparent armor; and Industrial Coatings, which primarily supplies a variety of protective and decorative coatings and finishes along with adhesives, sealants, metal pretreatment products, optical monomers and coatings, precipitated silicas and other specialty materials.
Formed in 2003 by an established team from Cazenove, one of the most respected investment banks in the UK, Atlantic Equities conducts and publishes fundamental, bottom up research on mid and large cap US companies.
Atlantic provide order execution through a wide range of DMA products and algorithmic trading suites.
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