Here's Why You Should Retain PPG Industries Stock in Your Portfolio

PPG Industries, Inc. PPG is gaining from pricing actions, enhanced manufacturing efficiencies, cost discipline and acquisitions amid headwinds from demand weakness, especially in Europe.

The company’s shares are down 24% over the past year compared with the Zacks Chemicals Specialty industry’s 5.6% decline.

Let’s find out why PPG stock is worth retaining at the moment.

Cost & Pricing Actions, Acquisitions Aid PPG

PPG Industries is implementing a cost-cutting and restructuring strategy and optimizing its working capital requirements. The cost savings generated by these restructuring initiatives will act as a tailwind for the company. It has undertaken extensive restructuring efforts to reduce its cost structure, primarily focusing on regions and end markets with weak business conditions. The company realized an additional $15 million in structural cost savings in fourth-quarter 2024. It expects around $45 million in restructuring savings (net of stranded costs) for full-year 2025. PPG also announced a comprehensive cost reduction program, which is expected to deliver pre-tax savings of $60 million in 2025. The program includes the reduction of structural costs, mainly in Europe and in certain other global businesses. 

PPG Industries is also raising selling prices across its business segments to offset the impact of cost inflation and drive profitability. Significant progress has been made in increasing consolidated segment margins. PPG Industries achieved the ninth consecutive quarter of segment EBITDA margin expansion in the fourth quarter of 2024, underscoring its sustained commitment to enhancing overall profitability.

The company is also undertaking measures to grow business inorganically through value-creating acquisitions. Contributions from the acquisitions are expected to be reflected in its performance. Acquisitions, including Tikkurila, Worwag, Cetelon and Arsonsisi’s powder coatings manufacturing business, are likely to contribute to its top line.

PPG Industries also remains committed to boosting shareholder returns with cash deployment. It has an impressive record of returning cash to shareholders through dividends and share buybacks. In 2024, the company returned $1.4 billion to shareholders through dividends and share repurchases. It paid dividends worth $620 million in 2024. PPG also bought back $750 million of shares in 2024. PPG's robust financial performance is reflected in the substantial operating cash flow generation, which reached around $1.4 billion in 2024.

Weaker Demand Weighs On PPG Stock

PPG remains exposed to soft demand conditions. Lower automotive OEM build rates and softer industrial production in the United States and Europe hurt volumes and sales in the Industrial Coatings unit in the fourth quarter. Weak consumer confidence is negatively impacting demand in Europe. Global automotive OEM production declined significantly in the fourth quarter. Automotive industry build rates declined in Europe and the United States due to lower demand and are expected to remain subdued in the first quarter of 2025. 

PPG also anticipates global industrial production to remain at a low level in the first quarter with continued weakness in the United States and Europe. It sees a low single-digit to a mid-single-digit percentage decline in industrial coatings segment sales in the first quarter, factoring in the subdued global industrial production. Overall organic growth is expected to be limited by lower automotive OEM and industrial production in the first quarter. Industrial coatings demand is expected to remain under pressure in the quarter.

PPG Industries, Inc. Price and Consensus

PPG Industries, Inc. price-consensus-chart | PPG Industries, Inc. Quote

PPG’s Zacks Rank & Other Key Picks

PPG currently carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the Basic Materials space are Carpenter Technology Corporation CRS, DRDGOLD Limited DRD and Idaho Strategic Resources, Inc. IDR. While CRS sports a Zacks Rank #1 (Strong Buy), DRD and IDR carry a Zacks Rank #2 (Buy), each. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Carpenter Technology for the current fiscal year stands at $6.95, reflecting a 46.6% year-over-year increase. CRS beat the Zacks Consensus Estimate in each of the last four quarters, with the average earnings surprise being 15.7%. 

The consensus estimate for DRD’s current-year earnings is pegged at $1.06 per share, indicating a 29.3% year-over-year rise. DRD’s shares have soared roughly 93% in the past year. 

The Zacks Consensus Estimate for Idaho Strategic Resources’ current-year earnings is pegged at 78 cents, suggesting a 16.4% year-over-year rise. IDR surpassed the Zacks Consensus Estimate in three of the trailing four quarters, while missing once, with an average earnings surprise of 77.5%. The company's shares have rallied around 91% in the past year.

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This article originally published on Zacks Investment Research (zacks.com).

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