PPG Earnings: Industrial Coating Headwinds Show Few Signs of Improvement; Shares Fairly Valued

Narrow-moat PPG reported fourth-quarter results that were slightly below our initial expectations. Net sales fell 4.7% year over year due to weakness in industrial and architectural end markets. Nevertheless, consolidated operating margin expanded 40 basis points to 12.1%, driven by a strong quarter in the company’s performance coatings segment. Demand across PPG’s portfolio remains mixed, with strength in aerospace and marine end markets offset by persistent weakness in industrial and automotive OEM. While we expect a recovery this year in industrial, automotive OEM and some architectural markets are likely to remain constrained for at least the first half of the year. As such, we have maintained our $120 per share fair value estimate.