PPG Industries (PPG) PT Lowered to $155 at Deutsche Bank
Deutsche Bank analyst David Begleiter lowered the price target on PPG Industries (NYSE: PPG) to $155.00 (from $160.00) while maintaining a Buy rating.
The analyst comments "PPG's shares fell 3.1% (S&P: -0.9%) following a roughly in-line Q1 release as i) EPS was slightly ahead of consensus, ii) Q2 EPS guidance was 2% below consensus but in-line with buy-side expectations, iii) full-year EPS guidance was reaffirmed and iv) a new $2.5B share repurchase program was announced (8% of the market cap) though with no timeframe attached to the program. Despite the in-line results, PPG shares underperformed following its Q1 release as investors focused on the 2H EPS guidance which, at the midpoint, represents 14% YoY growth. However, with Q1 volumes falling short of expectations (down 2% versus expectations of flat) and Q2 guidance modestly below expectations as Industrial and European demand remains weak, investors are concerned 2H guidance is too high. While the 2H is not without challenges, we believe PPG will be able to achieve its 2H EPS guidance, albeit at the low end of the range which represents more reasonable 11% growth. Underpinning our confidence is the long awaited inflection point in PPG volumes which is happening in Q2. We also note PPG's Q2-Q4 guidance does not include any share buybacks, notwithstanding the new $2.5 buyback announced in conjunction with the Q1 release Q1 marked PPG's 11th consecutive quarter of lower YoY volumes. However, led by growth in Aerospace, Protective & Marine and Packaging Coatings and by Mexico, China and India, PPG is guiding Q2 volumes being up low-single digits. We believe the return to volume growth in Q2 after 11 straight quarters of flat or lower volumes will not only be a catalyst for earnings but also could be a catalyst for the shares. With volume inflecting and valuation an attractive 15.6x '24E EPS versus 3- and 5- year average NTM P/E of 19x and PPG's valuation discount to Sherwin unusually large (8x EV/EBITDA {10.9x vs 19.3x} vs 5.5x historically), we reiterate our Buy rating."