Pennsylvania-based PPG Industries, Inc. (PPG) manufactures and distributes paints, coatings, and specialty materials. Valued at a market cap of $28.5 billion, the company serves a wide range of industries and operates in more than 70 countries around the world.
Shares of this paint and coating manufacturer have significantly lagged behind the broader market over the past 52 weeks. PPG has declined 10.2% over this time frame, while the broader S&P 500 Index ($SPX) has gained 31.1%. Moreover, on a YTD basis, the stock is down around 18%, compared to SPX’s 24.7% gain.
Zooming in further, PPG’s underperformance becomes more evident when compared to the Materials Select Sector SPDR Fund’s (XLB) 15.9% gain over the past 52 weeks and 9.4% return on a YTD basis.
Shares of PPG increased marginally after its Q3 earnings release on Oct. 16 but then decreased for four consecutive trading sessions from the following day. Its adjusted earnings increased 2.9% annually to $2.13 per share but missed the consensus estimates of $2.15. Moreover, PPG’s revenue of $4.58 billion decreased 1.3% from a year ago and fell short of the Wall Street estimates of $4.65 billion. The weaker-than-expected performance was primarily driven by a fall in revenues from the Industrial Coatings segment, mainly fueled by lower sales volumes and selling prices from some index-based client contracts. PPG’s announcement of plans to lay off around 1,800 employees amidst efforts to cut costs on Oct. 17 might have further impacted investor confidence.
For the current fiscal year, ending in December, analysts expect PPG’s EPS to grow nearly 6.7% year over year to $8.18. The company’s earnings surprise history is mixed. It beat or met the consensus estimates in three of the last four quarters while missing on another occasion.
Among the 23 analysts covering the stock, the consensus rating is a “Moderate Buy,” which is based on 13 “Strong Buy” and 10 “Hold” ratings.
On Nov. 18, Barclays maintained an “Equal-Weight” rating on PPG and lowered its price target to $144, which indicates a 17.4% potential upside from the current levels.
The mean price target of $149.80 represents a 22.1% potential upside from PPG’s current price levels. The Street-high price target of $165 suggests an upside potential of 34.5%.
