PPG, Sherwin-Williams beat estimates

* PPG says activity stabilized in March

* PPG sees demand growth in Q2

* Sherwin-Williams reaffirms 2009 earnings view

* PPG shares up 4.1 pct, Sherwin-Williams up 11.5 pct (Adds second analyst quote)

By Hezron Selvi

NEW YORK, April 16 (Reuters) – Paint makers PPG Industries Inc (PPG.N) and Sherwin-Williams Co (SHW.N) posted better-than expected earnings on Thursday as lower costs helped the companies navigate a global recession that still led to declines in profit.

PPG also said it expects some seasonal demand growth in the second quarter and Sherwin-Williams reaffirmed its full-year earnings forecast. Shares of both companies were higher in afternoon trading.

The U.S. housing downturn and economic recession has cut residential and commercial demand for paint, leading chemical companies to cut jobs and shut down plants to save cash.

In February, Akzo Nobel (AKZO.AS) — the world’s No. 1 paint maker — reported an 18 percent drop in operating profit and warned of a very challenging year.

PPG, the world’s second-largest paint and coatings maker, said it earned 19 cents a share in the quarter, excluding charges related to restructuring and an asbestos settlement. That was better than the 13 cents a share that analysts had forecast on average, according to Reuters Estimates. [ID:nN16444212]

The company, which recently announced 2,500 job cuts, said March ended better than initially anticipated, as activity steadied in several of its U.S. end-use markets.

“Looking ahead, we anticipate some seasonal demand growth in the second quarter, but expect activity levels to remain low in comparison with recent years,” PPG Chief Executive Charles Bunch said.

However, Longbow Research analyst Dmitry Silversteyn does not believe PPG is out of the woods yet.

“The stabilization in the March quarter, while definitely better than hearing things have degenerated further, is not much different from our expectations. We still expect PPG to have a pretty tough year,” Silversteyn said.

Sherwin-Williams’ net income fell more than 50 percent to $37.3 million, or 32 cents a share in the first quarter. Analysts on average had expected earnings of 21 cents a share, according to Reuters Estimates. [ID:nBNG279133]

The maker of the Sherwin-Williams, Dutch Boy and Pratt and Lambert paint brands cut its sales forecast for the full year 2009, but reaffirmed its earnings forecast for the year.

The company now expects full-year consolidated sales to fall by 9 to 12 percent. It had earlier expected sales to drop in the low-to-middle single digit percentage range.

But Morgan Stanley analyst Gregory Melich said in a research note that “despite the worst home improvement downturn in decades, (Sherwin-Williams) remains a highly cash generative asset.”

Longbow’s Silversteyn painted a not-so-rosy picture for both PPG and Sherwin-Williams.

“Am I ready to say the housing market, and therefore … the paint market, has stabilized? I’m not ready to say that yet. The declines may get less pronounced, but I really don’t see stabilization or growth in these markets taking place until sometime 2010,” said Silversteyn, who has a “sell” rating on both companies.

PPG shares were up 4.1 percent to $46.26 in afternoon trading, while Sherwin-Williams shares were up 11.5 percent to $57.01. (Additional reporting by Anupreeta Das in New York and Dhanya Skariachan in Bangalore; Editing by Tim Dobbyn)