Shares of PPG Industries (NYSE:PPG) dropped over 10% today. The drop came after the company warned investors that it will soon report third-quarter 2018 operating results reflecting higher material costs and softened demand from China in several product categories. Additionally, the company witnessed increased logistics expenses from both higher raw-material costs and rising crude oil prices, as well as lost income from weaker foreign currencies and a stronger U.S. dollar.
In other words, almost all of the most important metrics dictating the international business's fate have deteriorated in the second half of 2018. Considering that most of the factors are well outside of management's control, Wall Street isn't wasting any time adjusting the company's market valuation lower.
As of 3:15 p.m. EDT, the stock had settled to a 9.3% loss.
PPG Industries prepared investors with the following expectations for third-quarter 2018 operating results:
- Adjusted diluted earnings per share from continuing operations in the range of $1.41 to $1.45. That's well below one average of 20 Wall Street analyst projections, which settled at an adjusted EPS of $1.58.
- The company expects revenue of $3.8 billion, which is just lower than the $3.87 billion average expected by Wall Street.
What's more, PPG Industries expects fourth-quarter 2018 diluted earnings per share in the range of $1.03 to $1.14. Investors should note that this range is not for adjusted earnings, so it can't be directly compared to Wall Street expectations as currently reported. Additionally, the fourth quarter is typically seasonally weaker. For what it's worth, analysts expect an average of $1.34 in adjusted EPS in the final quarter of this year.
Investors and Wall Street are understandably upset that PPG Industries expects weak performance in the second half of 2018. While management noted that it expects to deploy $1 billion in share repurchases or acquisitions in the fourth quarter of 2018 alone, that may not be enough to win back disgruntled investors.
For that, the business may need to make progress increasing operating efficiency as best it can. Given the factors at play -- currency fluctuations, rising energy prices, and trade disputes -- that may prove difficult.