Global Urbanization And Digitalization Will Drive Sustainable Coatings

AN
AnalystHighTarget
AnalystHighTarget
Not Invested
Consensus Narrative from 18 Analysts
Published
03 Aug 25
Updated
03 Aug 25
AnalystHighTarget's Fair Value
US$47.00
39.4% undervalued intrinsic discount
03 Aug
US$28.47
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1Y
-15.9%
7D
0.5%

Author's Valuation

US$47.0

39.4% undervalued intrinsic discount

AnalystHighTarget Fair Value

Key Takeaways

  • Operational excellence initiatives, digital integration, and automation position Axalta for significant margin and earnings expansion, well above prevailing market expectations.
  • Innovation in sustainable coatings and AI-driven platforms, combined with strong presence in high-growth regions, drives above-market revenue, resilient margins, and long-term earnings power.
  • Shifting auto market trends, rising global competition, regulatory pressures, and underinvestment in innovation threaten Axalta's market share, margins, and revenue stability.

Catalysts

About Axalta Coating Systems
    Through its subsidiaries, manufactures, markets, and distributes high-performance coatings systems in North America, Europe, the Middle East, Africa, the Asia Pacific, and Latin America.
What are the underlying business or industry changes driving this perspective?
  • While analyst consensus anticipates ongoing margin gains from cost initiatives, this likely understates Axalta's transformational cost-reduction capacity: with only two years into its multiyear operational excellence plan and $3.5 billion in addressable costs, management highlights that automation, plant optimization, and digital tools like Nimbus can unlock substantial new efficiency, pointing to an earnings and net margin expansion well above market expectations.
  • Analyst consensus sees rising productivity and capex supporting efficiency; however, sustained capital deployment is likely to accelerate top-line growth and free cash flow even further, as investments in automation and digital integration directly increase manufacturing capacity, customer loyalty, and share-of-wallet, improving both revenue and long-term earnings power at a pace exceeding historical levels.
  • Demand for sustainable and advanced coatings is entering a structural inflection: regulatory shifts and customer sustainability preferences are already driving rapid adoption of Axalta's next-generation waterborne and low-VOC coating systems, and new launches like the next-gen waterborne basecoat and digital paint platforms are set to command premium pricing and deliver high-margin growth, directly lifting revenue and margins as global standards tighten.
  • Axalta's global platform is uniquely positioned to capture the next wave of urbanization and automotive electrification, with surging demand in China, Latin America, and Asia-Pacific outpacing industry volumes-recent growth in Mobility highlights Axalta's ability to win and expand in high-growth markets and EV applications, providing multiple levers for above-market revenue and EBITDA growth regardless of mature-market cyclicality.
  • The Nimbus digital platform rollout and AI-driven customer solutions will fundamentally transform the aftermarket and Refinish segments by deepening customer integration, enabling upsell of adjacent products, improving inventory management, and creating recurring revenue streams; as this ecosystem expands to tens of thousands of body shops, it will significantly increase Axalta's pricing power, revenue resiliency, and margin profile.

Axalta Coating Systems Earnings and Revenue Growth

Axalta Coating Systems Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?
  • This narrative explores a more optimistic perspective on Axalta Coating Systems compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
  • The bullish analysts are assuming Axalta Coating Systems's revenue will grow by 4.0% annually over the next 3 years.
  • The bullish analysts assume that profit margins will increase from 8.6% today to 11.0% in 3 years time.
  • The bullish analysts expect earnings to reach $640.5 million (and earnings per share of $2.99) by about August 2028, up from $446.0 million today. The analysts are largely in agreement about this estimate.
  • In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 19.2x on those 2028 earnings, up from 13.5x today. This future PE is lower than the current PE for the US Chemicals industry at 23.8x.
  • Analysts expect the number of shares outstanding to decline by 1.25% per year for the next 3 years.
  • To value all of this in today's terms, we will use a discount rate of 7.92%, as per the Simply Wall St company report.

Axalta Coating Systems Future Earnings Per Share Growth

Axalta Coating Systems Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?
  • The acceleration of electric vehicle (EV) adoption is leading to industry shifts in automotive manufacturing, which typically require fewer coatings per vehicle, potentially shrinking Axalta's long-term addressable market and impacting future revenues.
  • Intensifying competition from low-cost Asian and European coatings manufacturers, combined with sustained macro softness and volume declines in North America, could trigger price wars and continued margin compression, thereby weighing on Axalta's net margins and earnings growth over time.
  • Persistently high customer concentration in automotive OEM and refinish segments leaves Axalta exposed to significant demand swings, as evidenced by temporary but recurring volume pressures and distributor destocking, which have caused volatility in reported revenues and could destabilize earnings.
  • Regulatory and consumer momentum towards sustainable, non-toxic chemicals and materials may require significant ongoing investment for compliance and innovation, elevating Axalta's cost base and possibly reducing demand for existing legacy products, thus negatively affecting net margins.
  • Continued underinvestment in proprietary technology or R&D relative to global peers could erode Axalta's competitive advantages, especially with emerging risks like substitution by alternative materials and digital process innovation, potentially leading to declining market share, lower revenues and future margin pressure.

Valuation

How have all the factors above been brought together to estimate a fair value?

  • The assumed bullish price target for Axalta Coating Systems is $47.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Axalta Coating Systems's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  • However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $47.0, and the most bearish reporting a price target of just $30.0.
  • In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $5.8 billion, earnings will come to $640.5 million, and it would be trading on a PE ratio of 19.2x, assuming you use a discount rate of 7.9%.
  • Given the current share price of $27.82, the bullish analyst price target of $47.0 is 40.8% higher.
  • We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

How well do narratives help inform your perspective?

Disclaimer

AnalystHighTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystHighTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystHighTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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