PPG: Cyclical Recovery And Margin Expansion Will Lift Depressed Share Price

Analysts have nudged our PPG Industries fair value estimate slightly higher to $119.00 from $118.45, reflecting expectations for modestly improved profitability and valuation support, despite a series of trimmed but still constructive Street price targets in the $112 to $129 range.

Analyst Commentary

Street research remains mixed but generally constructive on PPG, with recent actions combining modest target cuts and at least one notable rating upgrade. The updated views reflect a balance between near term macro uncertainty and confidence in the company’s longer term earnings power and multiple expansion potential.

Bullish Takeaways

Bullish analysts argue that the recent share price weakness exceeds the deterioration in fundamentals, creating scope for valuation to re rate as cyclically depressed earnings normalize.
JPMorgan’s upgrade to Overweight underscores the view that current earnings are being constrained by temporary macro headwinds rather than structural demand erosion. This supports the case for reaccelerating growth into 2026.
Upside to the stock is seen if PPG executes on cost controls and mix improvement while benefiting from an eventual rebound in industrial and commodity exposed volumes.
Price targets in the low to mid $120s range still imply upside from recent trading levels. This suggests investors are being paid to wait for a cyclical recovery and margin expansion.

Bearish Takeaways

Bearish analysts are trimming price targets toward the low to mid $110s, reflecting concern that weaker macro conditions and inconsistent industrial demand will cap multiples and earnings revisions in the near term.
Expectations for a stronger second half have faded, with commentary highlighting slippage in commodity oriented businesses and limited seasonal support, which may pressure operating leverage.
Neutral rated views emphasize execution risk around navigating a choppy volume environment while sustaining pricing and margins, leaving limited room for near term upside surprises.
With multiple firms cutting targets, the Street is signaling a more muted risk reward profile over the next few quarters. This is contingent on evidence of volume stabilization and clearer visibility into 2025 to 2026 earnings growth.

What's in the News

Long serving chief financial officer Vince Morales plans to retire on July 1, 2026. PPG has launched an internal and external search for his successor as part of a planned succession process (Key Developments).
PPG introduced a new ultrafiltration antifouling membrane for industrial water treatment, designed for hard to treat oily waste streams and produced without intentionally added PFAS. The company is expanding capacity at its Barberton, Ohio facility (Key Developments).
The company completed a $690 million share repurchase program, buying back more than 6 million shares, or about 2.6% of shares outstanding, under its April 18, 2024 authorization (Key Developments).
PPG launched its ENVIROCRON Extreme Protection Edge Plus powder coating, a one coat edge protection technology aimed at improving corrosion resistance and finish quality for heavy duty and industrial applications (Key Developments).
PPG introduced the MIX'n'Shake automated stirring system for automotive refinish, integrated with the PPG LINQ digital ecosystem, to improve paint consistency, reduce waste and save shop labor time (Key Developments).

Valuation Changes

Fair Value Estimate: Risen slightly to $119.00 from $118.45, reflecting a modestly more constructive profitability outlook.
Discount Rate: Edged down marginally to approximately 8.00% from 8.01%. This indicates a barely lower assumed cost of capital.
Revenue Growth: Trimmed slightly to about 2.69% from 2.77%, signaling a modestly more cautious top line outlook.
Net Profit Margin: Increased slightly to roughly 11.51% from 11.48%, reflecting incremental efficiency and mix improvements.
Future P/E: Nudged higher to about 16.56x from 16.49x. This implies a small upward adjustment to the long term earnings multiple assumption.

Strategic investments in innovation and high demand in key segments are likely to boost PPG's revenue and earnings growth.
Efficiency improvements and cost controls are expected to enhance margins, especially in Europe and Mexico.
Unfavorable currency trends, lower automotive production, and geopolitical issues could negatively impact PPG's revenue and profitability across multiple segments.

Catalysts

About PPG Industries

Manufactures and distributes paints, coatings, and specialty materials in the United States, Canada, the Asia Pacific, Latin America, Europe, the Middle East, and Africa.What are the underlying business or industry changes driving this perspective?

PPG is beginning to realize the benefits of its enterprise growth strategy started in 2023, with a focus on organic sales growth through strategic investments in innovation, which is expected to impact revenue positively.
There is strong performance and expected continued demand in the Aerospace and Protective & Marine Coatings segments, driven by technology advantage products and share gains, which is likely to enhance revenue and earnings.
PPG is implementing efficiency improvements and cost controls, particularly in Europe and Mexico, which should lead to margin improvement and thus potentially better net margins.
They anticipate significant share gains, particularly in the Industrial Coatings segment with automotive OEMs, expected to drive revenue growth above industry levels, starting in the third quarter.
PPG is executing growth-related investments to support demand in Performance Coatings, including in Refinish through digital productivity tools, expected to improve revenue and earnings as volume grows.

PPG Industries Earnings and Revenue Growth

PPG Industries Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming PPG Industries's revenue will grow by 2.7% annually over the next 3 years.
Analysts assume that profit margins will increase from 8.1% today to 11.6% in 3 years time.
Analysts expect earnings to reach $2.0 billion (and earnings per share of $9.2) by about September 2028, up from $1.3 billion today. The analysts are largely in agreement about this estimate.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 16.9x on those 2028 earnings, down from 19.4x today. This future PE is lower than the current PE for the US Chemicals industry at 25.9x.
Analysts expect the number of shares outstanding to decline by 2.72% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 7.95%, as per the Simply Wall St company report.

PPG Industries Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Unfavorable foreign currency translation, particularly affecting the Global Architectural Coatings segment, could continue to impact PPG's revenue and profitability if currency trends persist.
The automotive industry's lower production levels, especially in the U.S. and Europe, may negatively affect PPG's Industrial Coatings segment's sales and profitability.
Geopolitical uncertainty and paused project spending in Mexico could hinder growth in the Architectural Coatings segment, potentially affecting revenue and margins if prolonged.
Industrial Coatings faces downward pressure from a 1% decline in selling prices due to index-based customer contracts, which could impact revenue and net margins.
Regional inflation, particularly from a weaker peso impacting Latin American operations, combined with lower sales volumes, may further erode segment EBITDA margins despite cost control measures.

Valuation

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

The analysts have a consensus price target of $127.35 for PPG Industries based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $145.0, and the most bearish reporting a price target of just $112.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $16.9 billion, earnings will come to $2.0 billion, and it would be trading on a PE ratio of 16.9x, assuming you use a discount rate of 7.9%.
Given the current share price of $109.38, the analyst price target of $127.35 is 14.1% 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.

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Disclaimer

AnalystConsensusTarget 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 AnalystConsensusTarget 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 AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Analysts Adjust PPG Industries Price Target Amid Mixed Outlook and Modest Valuation Changes