Alcoa Inc (AA), PPG Industries, Inc. (PPG): The Best Stock in the Industrial Sector?

For evidence of how well margins have expanded, I want to focus on the profit margins in its three largest businesses.

Note how well performance coatings and industrial coatings are expanding (don’t forget to look at them on a year on year basis).

There could be more to come with raw material costs moderating. PPG Industries, Inc. (NYSE:PPG)’s management were relatively cautious over the issue, but if we go back to Sherwin-Williams Company (NYSE:SHW)‘ last results, it reduced its view on raw material cost inflation for the year. Indeed, Sherwin-Williams Company (NYSE:SHW) reduced its view to flat from low single digits previously. Titanium dioxide and propylene prices may see some pressure as other parts of the industrial sector are not doing so well, and since these are key inputs into PPG Industries, Inc. (NYSE:PPG)’s cost base, I think there is reason to be optimistic.

The Bottom Line

In conclusion this company has a lot of things going for it. It’s a mixture of acquisition-led growth plus good exposure to the parts of the industry that are working right now. In addition, the increases in margin plus opportunities for synergy-driven cost savings mean that its (already substantial) cash generation can improve in future years. For those looking for exposure to an industrial cyclical then PPG Industries, Inc. (NYSE:PPG) looks to be one of the best options.

The article The Best Stock in the Industrial Sector? originally appeared on Fool.com.

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