PPG Industries stock target cut on mixed sector outlook

  • Investing.com
PPG Industries stock target cut on mixed sector outlook

On Monday, RBC Capital Markets adjusted its stance on PPG Industries (NYSE: PPG ), a global supplier of paints, coatings, and specialty materials. The firm's analyst reduced the stock price target to $141 from $156, while keeping a Sector Perform rating on the stock.

The revision reflects a mixed forecast for the company's performance. The analyst expects PPG Industries to benefit from positive price/cost dynamics, similar to peers in the sector, and to see volume growth momentum in the second half of the year, bolstered by strength in Aerospace, Comex, Auto OEM (particularly in China and electric vehicles), Packaging (NYSE: PKG ), and from increased share buybacks.

Still, the analyst also anticipates challenges ahead for PPG. A downward adjustment in the company's second-quarter earnings per share (EPS) and EBITDA, as well as for the full years 2024 and 2025 EBITDA estimates, has been made.

This is due to continued weakness in the DIY sector, Europe, and Industrial markets, along with softer near-term Auto OEM/Refinish volumes, which could also negatively impact competitors in the space.

The new stock price target of $141 is based on a 12 times multiple of the firm's forecasted FY24 EBITDA. This is a decrease from the previous 13 times multiple, which was adjusted in response to weaker volume expectations for the company.

PPG Industries' stock will continue to be monitored by RBC Capital as the market evaluates the company's strategic initiatives and its ability to navigate the mixed industry conditions.

InvestingPro Insights

In light of RBC Capital Markets' recent analysis of PPG Industries, real-time data and insights from InvestingPro can provide investors with additional context. PPG Industries is currently trading at a P/E ratio of 22.08, which reflects a valuation that some might consider steep relative to near-term earnings growth.

This aligns with the RBC Capital Markets' view that the stock may face challenges, as also indicated by the six analysts who have revised their earnings downwards for the upcoming period.

Despite these concerns, PPG Industries boasts a significant track record of shareholder returns, having raised its dividend for 54 consecutive years. This demonstrates the company's commitment to returning value to shareholders, a factor that could be reassuring to long-term investors. Moreover, the company has maintained a gross profit margin of 41.97% over the last twelve months as of Q1 2024, which is indicative of its operational efficiency in a competitive sector.

Investors considering PPG Industries may be interested in the additional PRONEWS24 InvestingPro Tips available, which include further analysis on the company's financial health and market performance. For instance, PPG's stock generally trades with low price volatility, which may appeal to those seeking a more stable investment in the current market environment. The company is anticipated to remain profitable this year, with profitability sustained over the last twelve months.

For a more comprehensive analysis and to unlock all the InvestingPro Tips for PPG Industries, investors can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. There are 7 additional InvestingPro Tips available that could provide deeper insights into the company's financial performance and stock valuation.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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