PPG: Cyclical Weakness Will Ease And Depressed Share Price Will Rebound

The analyst consensus price target for PPG Industries has decreased modestly from $121.20 to $119.80, as analysts cite ongoing cyclical weakness in key end markets and note that a softer macroeconomic environment is pressuring near-term earnings expectations.

Analyst Commentary

Recent analyst notes reflect a mix of optimism about PPG Industries' long-term potential and caution regarding near-term pressures. The following summarizes prevailing viewpoints across the Street:

Bullish Takeaways

Bullish analysts highlight that PPG's current valuation appears more depressed than warranted by underlying business fundamentals. This suggests room for multiple expansion as conditions normalize.
Expectations remain that cyclical headwinds, rather than structural issues, are currently weighing on earnings. There is potential for accelerated profit growth as macroeconomic factors improve, particularly from 2026 onward.
Long-term outlooks remain positive, as the company’s core demand patterns are viewed as resilient despite recent softness in select end markets.
Some positive ratings reflect confidence in management’s ability to execute through volatility and preserve shareholder value during downturns.

Bearish Takeaways

Bearish analysts are lowering price targets in response to persistent weakness across several industrial and commodity-linked end markets. This reflects cautious short-term sentiment.
Macro uncertainty is cited as a key risk, with inconsistent industrial demand and commodity business slippage contributing to earnings pressure.
Recent updates indicate that hopes for stronger Q4 seasonality have faded, which is dampening near-term growth expectations.
There is concern that a subdued macro environment may continue to act as a drag on results, at least through the remainder of the year.

What's in the News

PPG Industries has introduced an ultrafiltration (UF) antifouling membrane designed for industrial water treatment, featuring a super-hydrophobic surface to resist oil and contaminant fouling and produced without intentionally added PFAS. (Key Developments)
The company completed a buyback of 6,002,071 shares, representing 2.63% of shares outstanding, totaling $690 million under the repurchase program announced in April 2024. (Key Developments)
PPG launched PPG ENVIROCRON Extreme Protection Edge Plus, a patent-pending powder coating that advances edge-protection technology, offering improved corrosion resistance and a smoother finish for industrial applications. (Key Developments)
PPG unveiled MIX'N'SHAKE, an automated paint stirring system for automotive refinish, which increases color accuracy, reduces waste, and saves time for body shops. (Key Developments)
Solera and PPG formed a strategic partnership to integrate PPG's automotive refinish coatings with Solera's Sustainable Estimatics platform, enabling body shops to track and manage their CO2 emissions per repair. (Key Developments)

Valuation Changes

Consensus Analyst Price Target has decreased slightly from $121.20 to $119.80.
Discount Rate has risen marginally from 7.90% to 8.04%.
Revenue Growth estimate is nearly unchanged, moving fractionally from 2.98% to 2.98%.
Net Profit Margin estimate has declined slightly from 11.46% to 11.44%.
Future P/E has increased from 15.75x to 16.65x.

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