Wed, Nov. 25, 6:23 PM
- PPG Industries (NYSE:PPG) rose 0.9% today, and Valspar (NYSE:VAL) dropped 1.4%, as J.P. Morgan says it now prefers PPG in the chemical coatings space.
- Morgan's Jeffrey Zekauskas downgraded Valspar to Neutral, from Overweight, but raised its price target to $85, from $83. After a two-month run where Valspar rose 15.6%, shares closed today at $84.21.
- With its price gain, Valspar's free cash flow yield is 5.1% -- fair value, according to Zekauskas, since it's not high compared to the average in their coverage universe.
- Valspar's revenues should be flat or lower in fiscal 2016 as forex challenges offset acquisition-based sales growth, he writes: “We think the coatings company now offering the most favorable risk/reward balance for investment in the year ahead is PPG. ... We expect PPG to benefit from a favorable raw material dynamic and good domestic volume growth versus weak 1H:15 domestic volume comparisons.”
- Valspar was also downgraded at RBC Capital (though like J.P. Morgan, the firm raised its price target, to $82).
- Valspar shares fell 0.4% after hours.
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- PPG Industries (PPG -3.2%) names Michael McGarry as its new President and CEO effective Sept. 1, succeeding Chairman and CEO Charles Bunch in the role of CEO.
- McGarry has spent 34 years at PPG, and has served as President and COO since March; Bunch, who has led PPG for the last decade, will continue as Executive Chairman.
- Shares are lower following Q2 results marked by negative currency fluctuations that cut PPG's Q2 sales by $320M, vs. $260M in Q1 and $130M in Q4 2014.
- Q2 revenue edged up 0.4% to $4.1B; excluding currency fluctuations, sales rose 8%, but acquisitions contributed most of the growth, as sales volume grew 1%.
- Performance coatings segment sales added ~3% to $2.41B, mostly due to the Comex acquisition; industrial coatings sales fell 3% to $1.41B, as growth in sales volume and a boost from acquisitions was offset by negative currency impacts.
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- Energy companies finally are starting to halt a few new U.S. drilling projects as oil prices fall, which Barclays believes may put the U.S. oil boom at risk but "on balance, we believe lower oil prices are good.”
- If strong U.S. energy growth is interrupted, spending in the sector could be cut by $40B, but consumers could save $70B next year as the price at the pump falls for gasoline and diesel, according to Barclays head of U.S. equity strategy Jonathan Glionna.
- The most likely beneficiaries would be discretionary areas such as restaurants, entertainment, apparel, electronics and furniture, he says.
- Glionna lists 27 stocks that could benefit from lower oil prices: AAL, AGCO, AXL, BERY, BLMN, BWLD, CHH, CLX, DE, DPZ, FDX, GM, HD, KMB, KR, KSS, MHK, MMM, PENN, PPG, SAVE, SHW, TGT, UPS, VAL, WMS, WMT.
PPG Industries Inc is engaged in manufacturing and distributing coatings, specialty materials and glass products. The Company has three reportable business segments: Performance Coatings, Industrial Coatings and Glass.
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