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Chemical Stocks' Q2 Earnings to Watch on Jul 20: PPG, SXT

The second-quarter earnings season got off to a healthy start with positive earnings surprises from major banks. The season is still in its early stage with 30 companies on the S&P 500 index having reported their quarterly numbers as of last Friday. Per the latest Earnings Preview, total earnings for these companies (representing 9.3% of the index’s total market capitalization) have increased 13.8% year over year on 6% higher sales.

The growth picture for second quarter reflects a moderation from the first. Total earnings for the quarter are expected to be up 6.6% year over year on a 4.5% increase in revenues. This is in contrast to a 13.3% increase in earnings in the first quarter on 7% higher revenues, the highest growth pace in nearly two years.

In this write-up, we put the spotlight on a couple of chemical companies that are schedule to report on Jul 20. As per the Zacks Industry classification, the chemical industry is grouped under the broader Basic Materials sector. Overall Q2 earnings for the sector are projected to rise 1.7% while revenues are expected to increase 3.3%.

The chemical industry is back on track after staying down for long. Despite a spate of headwinds, the industry put up a commendable performance in the first quarter with a host of companies reporting better-than-expected earnings.

While the industry still remains hamstrung by several challenges, its healthy momentum is expected to continue in the second quarter, supported by continued strength across key end-use markets (such as automotive and construction) and an upswing in the world economy. Chemical makers should gain from continued focus on cost and productivity, operational efficiency improvement and expansion of scale through acquisitions.

We take a sneak peek into two chemical companies that are gearing up to report their second-quarter results this Thursday.

PPG Industries, Inc. PPG will report ahead of the opening bell. Our proven model does not conclusively show that the company is likely to beat estimates this quarter. The company has an Earnings ESP of -0.56% as the Most Accurate Estimate stands at $1.79 while the Zacks Consensus Estimate is pegged at $1.80. The stock carries a Zacks Rank #4 (Sell). We caution against Sell-rated (Zacks Rank #4 or 5) stocks going into the earnings announcement. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

PPG Industries surpassed the Zacks Consensus Estimate in three of the trailing four quarters, delivering an average positive earnings surprise of 1.11%. While the company should continue to benefit from its cost-management initiatives through its restructuring program, weakness across some of its end-markets, modest growth in emerging markets and raw materials cost inflation may weigh on its second-quarter earnings. (Read More: What's in Store for PPG Industries in Q2 Earnings?)

PPG Industries, Inc. Price and EPS Surprise


PPG Industries, Inc. Price and EPS Surprise | PPG Industries, Inc. Quote

Sensient Technologies Corporation SXT, which will report after the bell, has an Earnings ESP of 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate stand at 87 cents. While the stock carries a favorable Zacks Rank #3 (Hold), its 0.00% ESP makes surprise prediction difficult. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The company beat estimates in each of the trailing four quarters at an average rate of 3.79%.

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