PPG Earnings: Moderating Input Costs Drive Margin Expansion Despite Stagnant Volumes

Narrow-moat PPG capped off a strong year with solid fourth-quarter results that were largely in line with our expectations. PPG navigated a challenging year when higher interest rates constrained its architectural coatings business and tepid industrial production hampered its industrial coatings segment. That said, PPG was able to largely offset this through strength in aerospace, automotive OEM (original equipment manufacturing), and protective coatings, while moderating input costs and higher selling prices drove margin expansion. While interest-rate headwinds are likely to persist for much of 2024, we think continued strength from aerospace, automotive refinish, and PPG’s Mexico business will lead to low mid-single-digit revenue growth and improved earnings. As such, we have maintained our $117 fair value estimate.