PPG Industries: Is Now A Good Time To Buy The Stock?

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The world’s second largest paint coating manufacturer, PPG Industries (PPG), reported record financial growth in the most recent quarter. But the stock has seen only modest price gains year-to-date. The question is, will the stock gain momentum in the near term to reflect its robust financials? 

PPG Industries, Inc. (PPG - Get Rating) is the world’s second largest paint coatings company and is ranked #209 on the Fortune 500 list. Its shares have gained 74% over the past year, and 6.8% year-to-date.

The stock surged 5.2% in aftermarket trading  following its record quarterly earnings release on January 21. PPG’s revenues have increased 15% year-over-year to a record $3.9 billion in its fiscal first quarter, ended March 31, 2021. Its EPS rose nearly 54.9% from its  year-ago value to $1.58.

The paint industry is expected to grow significantly in 2021 as industrial and commercial construction picks up nationwide. This could allow PPG to report new highs this year.

Here’s what we think could shape PPG’s performance in the near term:

Industry Tailwinds

PPG is the second largest paint company in the world in terms of revenues. The company stands to benefit significantly from the White House’s proposed infrastructure spending  package because   rising construction demand will likely translate into higher demand for paints also.  PPG specializes in industrial coatings and performance coatings, having applications in both industrial and housing construction markets.

With  rising housing demand driving  increased construction demand because the real estate markets currently face lean inventories, demand for PPG’s products is expected to rise significantly in the near term. Moreover, President Biden’s proposed  $2 trillion-plus infrastructure bill, labelled a “once-in-a-lifetime” generational opportunity, could  help PPG become a trillion-dollar business over the  long term.

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