PPG: Cyclical Demand Recovery Will Lift Depressed Share Price Over Time

We trim our PPG Industries price target modestly to $118.45 from $119.80, as analysts lower near term expectations amid softer macro and uneven industrial demand, even as they highlight cyclical, not structural, earnings pressures and see room for valuation to recover over time.

Analyst Commentary

Recent Street research on PPG Industries reflects a mixed but generally constructive stance, with several firms trimming price targets in response to softer macro trends while still seeing scope for valuation recovery as cyclical headwinds ease.

Bullish Takeaways

Bullish analysts argue that PPG's share price has fallen more than underlying business fundamentals, creating room for valuation multiples to expand as sentiment normalizes.
JPMorgan highlights that current earnings are being pressured by cyclical weakness rather than structural demand erosion, supporting the case for earnings growth to re accelerate by 2026.
Despite modest price target reductions, some research maintains positive ratings, signaling confidence in management's ability to execute through near term volatility and protect margins.
Maintained or upgraded recommendations suggest that long term growth drivers in coatings and specialty materials remain intact, with the stock viewed as leveraged to an eventual industrial recovery.

Bearish Takeaways

Bearish analysts are trimming price targets to reflect a more challenging macro backdrop, including weakening commodity trends and inconsistent industrial end markets that pressure near term revenue visibility.
Neutral stances emphasize that the earnings backdrop into the second half is "decidedly negative," with earlier hopes for a more benign seasonal pattern now seen as unrealistic.
Lowered targets in the $115 to $129 range underscore concerns that execution, while solid, may not be enough to fully offset volume softness and pricing normalization over the next few quarters.
Some observers caution that until industrial demand stabilizes and volume growth proves sustainable, upside to PPG's valuation will likely remain capped in the near term.

What's in the News

PPG announced that long tenured Chief Financial Officer Vince Morales plans to retire on July 1, 2026, with an internal and external search underway for his successor as part of a structured succession process (Executive Changes).
The company introduced a new ultrafiltration antifouling membrane for industrial water treatment that is designed to handle hard to treat oily waste streams without intentionally added PFAS, targeting applications such as oil water separation and industrial wastewater reuse (Product Announcement).
PPG completed a $690 million share repurchase program, buying back more than 6 million shares, or about 2.63% of its outstanding stock under the authorization announced in April 2024 (Buyback Tranche Update).
PPG launched ENVIROCRON Extreme Protection Edge Plus powder coating, a one coat solution aimed at improving corrosion resistance and finish quality on sharp edges and complex metal geometries common in heavy duty and industrial equipment (Product Announcement).
A new partnership with Solera will integrate PPG refinish coatings data into Solera’s Sustainable Estimatics platform, allowing body shops to track and manage CO2 emissions per repair in line with emerging European regulatory reporting requirements (Client Announcement).

Valuation Changes

Fair value was trimmed slightly to $118.45 from $119.80, reflecting modestly lower earnings expectations.
The discount rate was reduced marginally to 8.01% from 8.04%, indicating a slightly lower assumed cost of capital.
Revenue growth was lowered moderately to approximately 2.77% from 2.98%, incorporating a softer top line outlook.
The net profit margin was nudged higher to about 11.48% from 11.44%, assuming modest efficiency and mix benefits.
The future P/E eased slightly to roughly 16.49x from 16.65x, embedding a small contraction in the valuation multiple.

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.

How well do narratives help inform your perspective?

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