Analyst Note| Charles Gross |
PPG's share price may have risen roughly 16% during the fourth quarter, but financial results tell a different story. Sharp year-over-year improvement during the third quarter softened as the year wrapped up as COVID-19 cases surged again. Fourth-quarter sales improved 2% from the prior year to $3.76 billion, due mostly to currency movements and acquisitions. Business-oriented end uses performed nicely in the fourth quarter, but consumer-oriented uses were a drag. Heading into 2021, we think PPG will turn the corner, growing sales and earnings. However, investors should expect growth to be more robust in the back half of the year, as flying and driving activity is poised to remain depressed until coronavirus vaccination becomes more widespread. Our $87 per share fair value estimate and narrow moat ratings stand. With shares trading about 61% above our fair value estimate, they look substantially overvalued.