Last Update22 Oct 25Fair value Decreased 1.43%
Analysts have slightly reduced their price target for PPG Industries to $124.00 from $125.80. They cite prevailing macroeconomic headwinds, recent slippage in commodity business performance, and highly inconsistent industrial end markets as reasons for the modest downward adjustment.
Analyst Commentary
Recent street research on PPG Industries reflects a mix of cautious optimism and lingering concerns about the company's outlook. Analysts have weighed in on both short-term challenges and potential areas for recovery and growth.
Bullish Takeaways- Bullish analysts highlight that PPG's current market value appears disconnected from business fundamentals, which suggests the stock is undervalued relative to its true performance potential.
- While earnings are currently impacted by cyclical weakness, these analysts believe underlying structural demand remains intact and positions the company for future recovery.
- Some expect PPG's earnings growth could accelerate in the coming years, particularly by 2026, if macroeconomic headwinds begin to abate.
- There is room for valuation expansion if business conditions normalize and investor sentiment improves.
- Bearish analysts remain wary of persistent macroeconomic headwinds and the recent decline in commodity business performance, which clouds the near-term outlook.
- Industrial end markets are described as highly inconsistent, which hinders clear visibility into earnings stability or growth.
- Expectations that weaker seasonal results in the second quarter would lead to improved trends in the fourth quarter have not materialized, which raises concerns about continued softness.
- Downward adjustments to price targets reflect skepticism about near-term recovery and highlight challenges in execution during a difficult operating environment.
What's in the News
- Launched PPG ENVIROCRON Extreme Protection Edge Plus powder coating, a one-coat solution that enhances edge protection and corrosion resistance in industrial applications. This reduces the need for extra surface preparation (Product Announcement).
- Introduced PPG MIX'N'SHAKE, an automated paint stirring technology for the automotive refinish industry. It improves color consistency, reduces waste and time, and integrates with the PPG LINQ digital ecosystem (Product Announcement).
- Solera and PPG announced a strategic partnership to integrate PPG's automotive refinish coatings and emissions metrics into Solera's Sustainable Estimatics platform. This helps customers track and manage CO2 emissions per repair (Client Announcement).
- Released PPG HI-GARD Non-Methanol hard coating for ophthalmic lenses. This enables compliance with evolving regulations while maintaining durability and reducing workplace toxicity (Product Announcement).
- Extended joint venture agreement with Asian Paints Ltd. in India, continuing the partnership for 15 years to provide a range of coating solutions to customers across industrial, protective, marine, and automotive sectors (Strategic Alliance).
Valuation Changes
- Consensus Analyst Price Target has fallen modestly from $125.80 to $124.00.
- Discount Rate has risen slightly from 8.01 percent to approximately 8.02 percent.
- Revenue Growth expectations have increased from 2.67 percent to about 2.79 percent.
- Net Profit Margin has decreased marginally from 11.58 percent to 11.44 percent.
- Future P/E has edged down from 16.73x to 16.65x.
Key Takeaways
- 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.
- 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 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.
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