Tuesday, October 5, 2010

Citigroup (NYSE:C) Maintains "Buy" On PPG Industries (NYSE:PPG)

Citigroup Inc. (NYSE:C) reiterated its "Buy" on PPG Industries (NYSE:PPG) while increasing their price target, citing continuing growth.

Citigroup analyst P.J. Juvekar noted, "We recently met with PPG's CEO and walked away thinking that the steady growth we have seen in its end markets is continuing into the fall. Our recent work on shale gas leads us to believe there is upside to PPG's 2011 earnings in the chlor-alkali business, especially as its unfavorable natural gas hedges roll-off. We are reiterating our Buy on this high-quality, early cycle name and are raising our 2011 EPS estimate to $5.40 from $5.20. Price target to $85.

"Cheap natural gas is a significant benefit to PPG and US production costs are 40 percent below Asia on an ECU basis. Chlor-alkali production is energy-intensive and cheap natural gas lowers electricity costs. Caustic soda prices continue to rise and are now up $180/ton, or 82 percent YTD, aided by export demand from alumina and pulp & paper markets in South America. PPG's chlor-alkali business is a natural portfolio hedge to rising raw materials for coatings and throws off roughly $150mm of free cash flow in the current environment."

PPG closed Monday at $72.24, falling $0.85, or 1.16 percent.

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