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Darker Days Ahead For PPG Industries

Berenberg Bank analysts lowered their price target to $127 from $140 on PPG Industries, Inc. (NYSE:PPG), expecting further volume deterioration into H2/22 with a slowdown in construction activity across Europe and lockdowns in China persisting for longer than anticipated.
The analysts see downside risk to Q3/22 adjusted EPS, expecting it to be $1.70, compared to the company’s guidance of $1.75-2.00.
The analysts highlighted that the chemicals companies pointed to a much weaker development in the European construction market at the Berenberg Food Ingredients and Chemicals Conference last week. They also believe a profit warning from US-based Eastman last week owing to slower activity in Asia reads quite negatively for coatings producers such as PPG.
With an estimated 4.2% decline in volumes in Q3 and a 5% FX headwind owing to USD strength, the analysts do not expect a meaningful margin recovery in the quarter. However, they think that, for 2023, the Street may be underappreciating the upside from raw materials normalization owing to lower demand.

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