Executive Summary / Key Takeaways

• PPG has strategically reshaped its portfolio through divestitures, focusing on high-margin, technology-advantaged businesses to drive sustainable organic growth and achieve top-tier EBITDA margins.
• The company is leveraging AI-driven innovation and digital solutions, such as the MoonWalk system and DELTRON Premium Glamour Speed Clearcoat, to enhance customer productivity and secure market share.
• Despite a challenging macroeconomic environment and a "transitory slump" in automotive refinish, PPG delivered positive organic sales growth in Q1 2025 and expects low single-digit organic growth for the full year, with stronger performance in the second half driven by share gains.
• Significant investments in high-growth areas like aerospace coatings (over $0.5 billion for new capacity) underscore a commitment to long-term profitable expansion, with the aerospace business projected for mid- to high single-digit CAGR over the next three years.
• PPG maintains a strong balance sheet and a disciplined capital allocation strategy, prioritizing organic growth investments, opportunistic M&A, and consistent shareholder returns through dividends and share repurchases.

A Strategic Transformation for Enduring Value

PPG Industries, Inc., a global leader in paints, coatings, and specialty materials, is undergoing a profound strategic transformation, repositioning itself for sustained organic growth and enhanced profitability. Incorporated in 1883, PPG's long history has been marked by evolution, including managing legacy liabilities such as asbestos-related claims and environmental contingencies. The launch of its Enterprise Growth Strategy in 2023 signaled a decisive pivot, emphasizing organic capabilities and strategic innovation. This culminated in significant portfolio optimization during late 2024 and early 2025, with the divestiture of its U.S. and Canada architectural coatings business and its remaining Russian operations. These actions have sharpened PPG's focus, aiming for higher operating margins and a more agile organization.

The company's strategic shift is underscored by a new segment reporting structure, effective December 31, 2024, now comprising Global Architectural Coatings, Performance Coatings, and Industrial Coatings. This enhanced visibility highlights PPG's commitment to driving growth and performance across its diversified portfolio. The Performance Coatings and Global Architectural Coatings segments now boast full-year EBITDA margins at or above 20%, reflecting the value customers place on PPG's technology-advantaged products and strong brands.

Technological Edge and Innovation as a Growth Catalyst

PPG's competitive moat is significantly strengthened by its differentiated technology and relentless pursuit of innovation, which are central to its strategy. In the automotive refinish market, a critical vertical, PPG has introduced the DELTRON Premium Glamour Speed Clearcoat. This product is a paradigm shift, being the first of its kind "fully designed with AI technology using proprietary PPG data," resulting in a refinish product that combines high-quality appearance with increased application speed. This innovation not only delivers tangible benefits to body shops but also redefines PPG's innovation process, enabling faster market-leading solutions.

Beyond chemistry, PPG is a leader in digital productivity solutions. Its PPG MOONWALK® automated paint mixing system, launched in 2019, has seen remarkable adoption, with over 3,000 installations globally by July 2025. This system significantly improves paint mix consistency, reduces consumable waste, and saves time for painters, directly enhancing customer productivity. The company also offers LINQ subscriptions, further supporting customer partnerships and generating recurring revenue streams.

In specialty materials, PPG's HI-GARD Non-Methanol hard coating for ophthalmic lenses offers scratch-resistant protection while meeting evolving regulatory requirements. The PPG TRIVEX® lens material outperforms polycarbonate, exhibiting "less damage during impact testing, lighter weight, higher optical clarity and better chemical resistance". Furthermore, the company's ENVIROCRON Extreme Protection Edge Plus powder coating provides exceptional corrosion protection on hard-to-coat edges for industrial applications. These innovations collectively contribute to PPG's competitive advantage by offering superior performance, efficiency, and sustainability, translating into higher value for customers and stronger financial performance for PPG.

Competitive Positioning and Market Dynamics

PPG operates in a highly competitive global landscape, vying with industry giants like Sherwin-Williams (SHW), AkzoNobel (AKZA), BASF (BAS), and Axalta Coating Systems (AXTA). PPG's strength lies in its integrated services and operational execution, particularly in specialized industrial segments and aftermarkets. For instance, in automotive refinish, PPG and one other competitor lead with comprehensive productivity solutions, consistently gaining share against smaller players. The company's diverse portfolio, offering everything from adhesives and sealants for aerospace to metal pretreatments, provides greater versatility and efficiency in complex applications compared to more specialized rivals.

While precise, directly comparable market share figures for all niche competitors are not publicly detailed, PPG's strong performance in aerospace, protective and marine, and packaging coatings suggests robust market penetration. The company's "local for local" manufacturing and sales model, particularly evident in China and Mexico, provides a structural resilience against global trade uncertainties and tariffs, a key differentiator against competitors with more centralized production.

However, PPG faces challenges. While its profitability and growth metrics are generally competitive, it may lag some peers in innovation speed in certain areas or cash flow resilience. For example, AkzoNobel's pronounced focus on sustainability and BASF's chemical innovation leadership could enable faster growth in emerging green markets or product development cycles. PPG's strategy to counter this involves continuous R&D, including AI-driven formulation, and targeted investments in high-growth segments.

Financial Performance and Operational Momentum

PPG's recent financial performance reflects the initial benefits of its strategic repositioning, even amidst a dynamic macroeconomic environment. For the nine months ended September 30, 2025, net sales were $11,961 million, a slight decrease from $12,116 million in the prior year, primarily due to divestiture-related sales and unfavorable foreign currency translation, partially offset by higher selling prices and sales volumes. Income from continuing operations for the same period was $1,276 million, down from $1,366 million in 2024. However, adjusted earnings per diluted share from continuing operations for the nine months ended September 30, 2025, was $6.06, compared to $6.25 in the prior year.

In the third quarter of 2025, PPG reported net sales of $4,082 million, a 1% increase year-over-year, driven by higher selling prices, sales volumes, and favorable foreign currency translation. Adjusted earnings per diluted share reached a record $2.13, a 5% increase year-over-year. This growth was achieved despite a $22 million decrease in income before income taxes, primarily due to wage and other cost inflation and divestitures, partially offset by increased manufacturing productivity and cost-control measures.

Segment-wise, Performance Coatings delivered record net sales in Q3 2025, with a 2% organic sales increase. Aerospace Coatings, a significant growth engine, achieved double-digit organic sales growth and record quarterly sales and earnings. Its customer order backlog increased to $310 million. Protective and Marine Coatings marked its tenth consecutive quarter of year-over-year volume growth with double-digit organic growth. Industrial Coatings saw sales volumes increase by 4% in Q3 2025, outpacing industry demand due to share gains in automotive OEM and packaging coatings.

PPG's liquidity remains robust. As of September 30, 2025, cash and short-term investments totaled $1,832 million, up from $1,270 million at December 31, 2024. Cash from operating activities for the nine months ended September 30, 2025, was $1,047 million. The company is actively managing its debt, including a $900 million public offering of 3.25% Notes due 2032 in March 2025 and the repayment of $300 million in notes in June 2025. PPG's commitment to shareholder returns is evident, with $1.2 billion delivered to shareholders year-to-date through share repurchases and dividends, including a 4% increase in the quarterly dividend in July 2025.

Outlook, Guidance, and Risk Assessment

PPG has updated its full-year 2025 adjusted earnings per diluted share guidance to a range of $7.60 to $7.70. This outlook reflects a nuanced view of the macroeconomic environment. While the first half of 2026 is anticipated to be softer than previously envisioned due to continued macro choppiness, PPG expects to deliver low single-digit organic sales growth for the full year 2025. This growth will be significantly bolstered by the realization of over $100 million in annual share gains within the Industrial Coatings segment, which are already "won deals."

Key assumptions underpinning this guidance include continued strength in aerospace and protective and marine coatings. However, the automotive refinish business is expected to face lower organic sales in Q4 2025 due to distributor order patterns and a "transitory slump in collision claims", with industry normalization not expected until mid-2026. European architectural coatings demand is anticipated to remain soft, while project-related spending in Mexico is expected to see a modest recovery.

PPG is proactively addressing potential headwinds. The company expects low single-digit raw material inflation for 2025 due to enacted tariffs, but its "local for local" supply chain and flexible manufacturing capabilities provide a "shock absorber" against broader market volatility. Management is implementing aggressive cost control and operational excellence programs, with approximately $75 million in restructuring savings expected in 2025.

The company acknowledges several risks. The unpredictable nature of litigation, including asbestos and environmental claims, could materially impact results in specific periods, though management believes the aggregate outcome will not materially affect financial position or liquidity. The ongoing macroeconomic uncertainty, geopolitical issues, and fluctuations in raw material costs and foreign exchange rates remain pertinent. However, PPG's diversified portfolio, disciplined cost management, and focus on technology-advantaged products are designed to mitigate these risks and drive sustainable growth.

Conclusion

PPG Industries, Inc. is executing a compelling investment thesis centered on a strategically sharpened portfolio and a robust commitment to innovation. Through decisive divestitures and a refined segment structure, the company has positioned itself for higher margins and more focused growth. Its technological differentiators, from AI-designed clearcoats to advanced digital productivity tools like MoonWalk, are not merely incremental improvements but fundamental shifts that enhance customer value and secure market share.

Despite a challenging global macroeconomic backdrop and specific headwinds in the automotive refinish market, PPG's underlying operational momentum, driven by consistent share gains and strategic investments in high-growth areas like aerospace, is evident. The company's disciplined capital allocation, strong balance sheet, and clear path to achieving its updated 2025 guidance underscore its resilience. As PPG continues to leverage its technological leadership and operational excellence, it is well-positioned to deliver profitable organic growth and sustained shareholder value, making it a compelling consideration for discerning investors.