There are no safe havens in the stock market. Every stock carries risk. But some less than others. This column features stocks that have shown one or more of the following characteristics: less volatility, better earnings, larger market caps, safe and increasing dividends. In these times of turmoil, our goal is to show readers better opportunities for investing with fewer risks.

May 14, 2012 - PPG Industries, Inc. (PPG-NYSE) manufactures and supplies protective and decorative coatings. The company offers coating products for automotive and commercial transport/fleet repair and refurbishing, specialty coatings for signs, and light industrial coatings; and sealants, coatings, technical cleaners, and transparencies for commercial, military, regional jet, general aviation aircraft, and transparent armor for military land vehicles.

In addition, the company sells industrial and automotive coatings to manufacturing companies; adhesives and sealants for the automotive industry; metal pretreatments and chemicals; and coatings and inks for aerosol, food, and beverage containers.

Further, it supplies lenses, sun lenses, and optical lens materials; amorphous precipitated silicas for tire and battery separator markets; and Teslin substrate used in radio frequency identification tags and labels, e-passports, drivers' licenses, and identification card applications.

Additionally, the company offers chlor-alkali and derivative products, such as chlorine, caustic soda, vinyl chloride monomer, chlorinated solvents, calcium hypochlorite, ethylene dichloride, hydrochloric acid, and phosgene derivatives to manufacturing companies in the chemical processing, plastics, polyvinyl chloride, paper, minerals, metals, and water treatment industries. It also produces flat and continuous-strand fiber glasses for commercial and residential construction, wind energy, energy infrastructure, transportation, and electronics industries.

All kinds of good things are happening at PPG with the exception of a restructuring charge taken last quarter ($1.06), an environmental remediation charge (64 cents) and an acquisiton cost of 3 cents. Those charges dropped earnings to 8 cents a share. If these one time events hadn't happened, earnings would have been $1.81, well above the $1.41 of last year in the first quarter. Having taken these hits, analysts see the rest of the year as positive.

Second quarter should show $2.37 compared to $2.12 last year in the second, if 16 analysts' consensus is correct. For the third quarter, they see $2.19 vs $1.96. They're projecting $7.94 for the full year compared to $6.79 in 2011.

Some of the reasons for the good growth: while the Optical and Specialty Materials (O&SM) is only 9% of total revenues, it has the best margins at 32.6% and operating earnings were higher by 21% to $109 million in the first quarter. Performance Coating (31% of revenues) saw sales increase by 9.3% to $1.15 billion. Industrial Coatings (29% of revenues) went up by 5% to $1.076 billion. Performance Coatings and Industrial Coatings saw increased orders from automotive manufacturers.

PPG generates a lot of cash. Management, in the past, has used it for several different areas: raising the dividend, which was just hiked to 59 cents a quarter or a payout of $2.36 a year for a yield of 2.2%. Funds have also been used to buy back stock (about 16% in the past), buy other companies (about 33%) and make necessary capital expenditures (about 27%). Look for more corporate buys in the Optical segment where growth is faster, and maybe Coatings firms in Asia.

PPG coats more cars than any other company in the world. That means auto manufacturing is important to growth. The company has been focusing on Asian auto coatings because margins are higher. Still, domestic auto production is a large part of business. Expect more growth from the Optical and Specialty markets as well over the next few years.

All the good news hasn't been lost on investors. The stock is up from a low of $66.74 in the middle of last year, trading at an all-time high ($107.95) reached on May 3.

-Essential Numbers:
- Trailing P/E: 18.5
- Forward P/E: 11.8
- Price to sales: .99
- Price to book: 4.86
- Operating margin: 11.48%
- Profit margin: 5.83%
- Return on equity: 26.73%
- Return on assets: 7.24%
- Revenues: $15.1 billion
- Total cash: $1.03 billion
- Cash per share: $6.79
- Total debt: $3.66 billion
- Debt to equity: 104%
- Current ratio: 1.52
- Book value per share: $21.62
- Shars outstanding: 152.29 million
- Float: 151.53
- Held by insiders: .22%
- Held by institutions: 75%

Conservative investors should like this stock. There's plenty of diverse revenue sources, increasing margins, and strong cash flow to fund several different aspects of the business. Watch car output and global economies (export sales were 49% of the business in 2011). If they start to slow, expect analysts to trim their numbers. The stock price would surely follow.

- Company Web site: www.ppg.com

- Ted Allrich

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