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On Tuesday, BofA Securities issued a downgrade for PPG Industries (NYSE:PPG) stock, moving its rating from Buy to Neutral. Accompanying this rating change, the firm also reduced the price target from the previous $143.00 to $126.00. Currently trading at $101.48, PPG (WA:IBSP)’s stock sits between analysts’ targets ranging from $108 to $166. According to InvestingPro data, five analysts have recently revised their earnings expectations downward for the upcoming period, aligning with BofA’s cautious stance. Analysis suggests the stock may be undervalued at current levels. The adjustment by BofA Securities reflects concerns over the anticipated raw material costs and broader economic factors that may impact the company’s performance.
Steve Byrne, an analyst at BofA Securities, noted that the firm’s coatings raw material aggregator forecasts limited inflation in 2025, with year-over-year inflation expected to rise to over 1% by 2026. This prediction is primarily attributed to the expected deflation in crude oil prices, while other key inputs such as tin plate and epoxy resin are projected to inflate by 2-20% from first quarter 2025 levels.
The analysis also referenced recent statements from RPM International (NYSE:RPM) Inc., which indicated potential for higher inflation expectations. RPM anticipates mid-single-digit raw materials inflation for the fiscal year 2026, including a 3% negative impact from tariffs. Despite these challenges, PPG maintains strong financial health with an overall "GOOD" rating from InvestingPro. The company has demonstrated remarkable dividend consistency, raising payments for 54 consecutive years, with a current yield of 2.68%. BofA Securities highlighted these insights in their first quarter earnings preview, which detailed the raw materials situation.
PPG Industries, while having reduced its exposure to the housing market following the sale of its U.S. and Canada architectural business, still faces risks with its Mexico-based Comex business. BofA Securities pointed out that persistent tariffs could slow down the Mexican economy and adversely affect this segment of PPG’s operations.
Furthermore, PPG’s businesses in the automotive original equipment manufacturer (OEM) and refinish sectors could potentially suffer from demand destruction in the event of a recession, due to their sensitivity to consumer spending. These factors collectively contribute to the more cautious stance taken by BofA Securities regarding PPG Industries’ stock. Despite recent headwinds, PPG maintains solid fundamentals with a gross profit margin of 41.91% and has shown resilience with a 10.71% price return over the past week. For deeper insights into PPG’s valuation and growth prospects, including exclusive ProTips and comprehensive financial analysis, visit InvestingPro, where you’ll find detailed research reports and expert commentary.
In other recent news, PPG Industries has issued €900 million in 3.250% notes due 2032, as disclosed in an SEC filing. The company plans to use the proceeds for general corporate purposes, including capital expenditures and potential acquisitions. Meanwhile, Seaport Global Securities downgraded PPG Industries from Buy to Neutral, citing concerns about tariff impacts on the Industrial Coatings demand and adjustments in volume assumptions for key sectors. Similarly, JPMorgan also downgraded PPG Industries from Overweight to Neutral, reducing the price target to $115 due to competitive pressures from industry peers like Axalta.
RBC Capital Markets adjusted its price target for PPG Industries to $120, maintaining a Sector Perform rating, reflecting challenges in the automotive and industrial sectors. However, RBC anticipates volume stabilization and cost savings for the company by 2025. BMO Capital Markets lowered its price target to $130 but continues to recommend PPG Industries as an Outperform, highlighting the company’s strategic focus on growth and financial discipline. These recent developments indicate a mixed outlook for PPG Industries, with analysts emphasizing both challenges and potential opportunities in the company’s future.
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