PPG Industries, Inc. (PPG) Earnings & Analysis

Latest quarter

PPG reported third-quarter revenue of $4.4 billion, above the $4.3 billion consensus and up from $4.1 billion a year earlier. Adjusted earnings of $2.25 per share also beat the $2.13 consensus.

The company’s filing attributed the sales increase to higher prices and volumes, as well as currency translation and acquisitions. Aerospace organic sales grew by a double-digit percentage, while automotive refinish and protective and marine coatings also grew. Automotive OEM coatings organic sales declined by a low-single-digit percentage, according to the filing.

PPG’s operating margin rose to 14.9% from 14.4% a year earlier, while free cash flow declined to $411.0 million from $538.0 million. The filing said cost-of-sales inflation partly offset earnings growth, although the company’s third-quarter price increases fully offset cost-of-goods-sold inflation across the business.

For the quarter, PPG had expected its adjusted EBITDA margin to be flat to down 100 basis points year over year. CEO Tim Knavish reported an adjusted company EBITDA margin above 18%.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

CEO Tim Knavish said third-quarter organic sales rose 5%, including 2% volume growth, and that commercial actions fully offset companywide cost-of-goods-sold inflation. CFO Jamie Beggs said Industrial Coatings was the one segment where pricing had not yet covered that inflation because of the timing of index-based contracts.

Knavish said industrial margins were compressed as costs rose ahead of indexed prices. Asked when those contracts would catch up, he said some benefit had begun to appear, but “most of that benefit will come in Q1 and Q2 of next year.” He expects fourth-quarter margin compression to moderate, while the timing of full cost coverage depends in part on inflation.

Analysts also pressed Knavish on the automotive refinish business and its volume performance. He said “the destocking is behind us” and purchase orders were normalizing, while body-shop activity was improving sequentially. He added that PPG continued to win a couple hundred net body shops a month, although end-user activity remained below pre-COVID levels. Knavish said independent distributors’ year-end purchasing could introduce variability into the fourth-quarter outlook.

In aerospace, Knavish said demand supported a backlog near $300 million and that PPG was investing more than $500 million in capacity and productivity. The spending includes a $70 million expansion of aircraft-transparencies operations in Huntsville, Alabama.

For the fourth quarter, Beggs expects low-single-digit organic sales growth, led by aerospace, Latin American architectural coatings and packaging coatings. She expects cost-of-goods-sold inflation in the high-single-digit range. Knavish said it was too early to provide detailed 2027 guidance, but cited pricing catch-up, productivity and restructuring as expected contributors to margin expansion.

Guidance

PPG raised the midpoint of its full-year 2026 adjusted earnings-per-share outlook and narrowed the range to $7.90 to $8.10, from its earlier range of $7.70 to $8.10. In its results release, the company said the updated range reflected an improvement in its earnings outlook.