Buy gold, crypto and China, tread carefully on rich U.S. tech: BofA’s Hartnett
Introduction & Market Context
PPG Industries (NYSE:PPG) presented its first quarter 2025 financial results on April 29, showing modest organic sales growth despite currency headwinds and the impact of recent divestitures. The company’s stock responded positively, trading up 4.05% at $108.01 in after-hours trading following a regular session close of $102.96.
The results mark a recovery from the disappointing fourth quarter of 2024, when PPG (WA:IBSP) missed both earnings and revenue forecasts. The company’s diversified portfolio appears to be providing resilience in a challenging macroeconomic environment, with strength in aerospace, refinish, and protective coatings offsetting weakness in architectural and automotive segments.
Quarterly Performance Highlights
PPG reported first quarter 2025 net sales of $3.7 billion, representing a 1% increase in organic sales compared to the same period last year. Adjusted earnings per share came in at $1.72, with segment EBITDA margin at 19.4%. The company continued its shareholder-friendly capital allocation with approximately $400 million in share repurchases during the quarter.
As shown in the following chart of quarterly highlights:
The company’s sales performance was impacted by several factors, including positive volume growth in key segments, offset by currency translation (-3%) and the impact of divestitures (-2%). Selling prices remained relatively flat, with targeted increases in some areas balanced by index-based pricing adjustments in certain customer contracts.
The following net sales analysis illustrates these factors:
Segment Analysis
PPG’s Performance Coatings segment emerged as the standout performer in Q1 2025, delivering record quarterly sales and earnings. This segment achieved high single-digit organic sales growth, with particularly strong performance in aerospace (double-digit growth), traffic solutions (high single-digit growth), and protective & marine coatings (double-digit growth).
The segment’s EBITDA margin improved by 20 basis points to 24.3%, demonstrating PPG’s ability to maintain profitability in this business unit despite challenging market conditions.
The following chart details the Performance Coatings segment results:
In contrast, the Industrial Coatings segment faced headwinds, with net sales declining due to lower automotive OEM demand in mature markets, though this was partially offset by growth in Asia Pacific and Latin America. The segment’s EBITDA margin decreased by 90 basis points to 16.8%.
Industrial coatings volume showed positive momentum with growth in all regions, while packaging coatings sales volume growth was driven by share gains. The company expects continued pressure in this segment in Q2 2025, with organic sales projected to decline in the low to mid-single digits.
The Industrial Coatings segment performance is illustrated here:
The Global Architectural Coatings segment experienced the most significant challenges, with results impacted by soft but moderating European demand and paused investments in Mexico. Organic sales were flat in EMEA (Europe, Middle East, and Africa) and showed mid-single-digit growth in Latin America and Asia Pacific.
The segment’s EBITDA margin declined by 310 basis points to 16.8%, primarily due to lower volume and inflation related to currency, though this was partially offset by cost control actions. PPG expects organic sales growth to resume in this segment in Q2 2025, though currency translation is expected to remain unfavorable.
Balance Sheet and Capital Allocation
PPG maintained a strong financial position with a cash balance of $1.9 billion as of March 31, 2025. The company’s net debt stood at $5.4 billion, representing a net debt to adjusted EBITDA ratio of 1.9x, which is well within manageable levels.
During the quarter, PPG returned $550 million to shareholders through dividends and share repurchases, continuing its commitment to shareholder returns. The company also issued €900 million in long-term debt due in 2032, which will help manage €900 million in debt maturities due in 2025.
The following chart illustrates PPG’s cash deployment to shareholders over recent quarters:
Tariff Impact and Mitigation Strategies
PPG addressed the potential impact of tariffs on its business, noting that it is well-positioned to mitigate these effects. The company identified several specific impacts, including Mexico project delays, lower auto industry production, and reduced China exports to the U.S., but emphasized that each of these factors represents less than 1% of company net sales.
The company highlighted its differentiators that help offset tariff impacts, including its diverse portfolio with regionally balanced positions, accelerating self-help initiatives expected to deliver $75 million in benefits in 2025, and share gain momentum exceeding $100 million on an annualized basis.
Additional offsets include excess chemical supply and lower oil prices, European demand improvement and China stimulus, improved foreign exchange rates, infrastructure spending, and localization of production and supply chains.
As shown in the tariff impact and mitigation slide:
Outlook and Guidance
PPG maintained its full-year 2025 adjusted EPS guidance range of $7.85 to $8.05, despite the various challenges outlined in the presentation. For the second quarter, the company provided segment-specific organic sales projections, with Global Architectural Coatings expected to be flat to up low single digits, Performance Coatings up low to mid-single digits, and Industrial Coatings down mid to low single digits.
The company anticipates segment margins to decline by 80 to 100 basis points year-over-year in Q2 2025, with raw material and enacted tariff costs contributing to low single-digit inflation. Corporate expenses are projected at $85-95 million, net interest expense at $17-21 million, and an effective tax rate of 24-25%.
Looking beyond the near-term challenges, PPG positioned itself as a compelling long-term investment based on its diversified global portfolio, strong brands and technologies, asset-light and flexible cost structure, and consistent cash generation capabilities.
The company’s investment thesis is summarized in this visual:
PPG’s first quarter results demonstrate the company’s resilience in navigating a complex global business environment, with strength in certain segments offsetting weaknesses in others. While challenges remain, particularly in the automotive and architectural markets, the company’s diversified portfolio and strategic initiatives position it to maintain stable performance as it progresses through 2025.
Full presentation:
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.