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PPG INDUSTRIES INC (PPG) Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 adjusted EPS was $1.61 (+3% YoY) on net sales of $3.73B; reported EPS was $0.01 due to restructuring and portfolio optimization items, while aggregate segment EBITDA margin expanded for the ninth consecutive quarter .
  • Performance Coatings delivered 4% organic growth with segment EBITDA margin rising 260 bps to 23.1%; Industrial Coatings declined on weaker auto OEM/industrial demand and index-based pricing, while Global Architectural Coatings was pressured by FX (Mexican peso) and lower EMEA volumes .
  • 2025 outlook: adjusted EPS $7.75–$8.05 with organic sales growth low single-digit; Q1 organic growth expected flat to slightly down; EPS growth weighted to 2H on $100M+ annualized share gains in Industrial Coatings and cost actions ($60M in 2025; $175M program) .
  • Capital return: $250M Q4 buybacks ($750M FY24) and planned ~$400M buybacks in Q1 2025; quarterly dividend of $0.68 declared, payable Mar 12 .

What Went Well and What Went Wrong

What Went Well

  • Segment margin expansion continued for the ninth straight quarter; adjusted EPS grew YoY despite lower organic sales, aided by technology-advantaged products, moderated input costs, and structural cost actions (“ninth consecutive quarter of segment margin … expansion”) .
  • Performance Coatings delivered 4% organic sales growth and margin uplift (segment EBITDA margin 23.1%, +260 bps), supported by aerospace, protective & marine, and traffic solutions; aerospace backlog ~$300M with double-digit organic growth .
  • Strong LatAm/Mexico momentum and China growth; management highlighted expanded distribution via Comex and refinish digital subscriptions (Moonwalk +600 installations, >2,500 total) bolstering subscription revenues .

What Went Wrong

  • Industrial Coatings net sales fell 9% YoY and margins contracted (segment EBITDA margin 14.8%, -160 bps), driven by lower volumes and index-based selling price resets amid soft global industrial production .
  • Automotive OEM demand down high single digits in U.S./Europe; EMEA architectural organic sales declined low single digits as consumer confidence remained weak; FX translation (notably Mexican peso) negatively impacted Architectural .
  • Reported EPS compressed to $0.01 due to restructuring-related and portfolio optimization items (e.g., recognition of $110M accumulated FX translation losses tied to Argentina exit and a $146M Russia-related impairment), with a reported effective tax rate of 86% in Q4; adjusted tax rate was 22% .

Financial Results

Consolidated YoY (Q4 2023 → Q4 2024)

MetricQ4 2023Q4 2024
Net sales ($USD Millions)$3,912 $3,729
Net income ($USD Millions)$103 $2
Adjusted net income ($USD Millions)$372 $375
EPS (Reported, $USD)$0.43 $0.01
Adjusted EPS ($USD)$1.56 $1.61
Adjusted EBITDA margin (%)15.5% 15.9%
Total Segment EBITDA margin (%)17.7% 18.0%

QoQ Trend (Q2 2024 → Q3 2024 → Q4 2024)

MetricQ2 2024Q3 2024Q4 2024
Net sales ($USD Millions)$4,794 $4,575 $3,729
Adjusted EPS ($USD)$2.50 $2.13 $1.61

Segment Breakdown (Q4 2023 → Q4 2024)

SegmentMetricQ4 2023Q4 2024
Global Architectural CoatingsNet sales ($USD Millions)$943 $881
Segment income ($USD Millions)$131 $118
Segment EBITDA margin (%)16.5% 16.3%
Performance CoatingsNet sales ($USD Millions)$1,233 $1,262
Segment income ($USD Millions)$218 $259
Segment EBITDA margin (%)20.5% 23.1%
Industrial CoatingsNet sales ($USD Millions)$1,736 $1,586
Segment income ($USD Millions)$231 $185
Segment EBITDA margin (%)16.4% 14.8%
Total SegmentsSegment EBITDA margin (%)17.7% 18.0%

KPIs

KPIQ3 2024Q4 2024
Cash + short-term investments ($USD Billions)$1.3 $1.4
Net debt ($USD Billions)$5.2 $4.5
Share repurchases ($USD Millions)$200 $250
Aerospace order backlog ($USD Millions)~$290 ~$300

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted EPSFY 2025—$7.75–$8.05 New full-year guide introduced
Organic sales growthFY 2025—Low single-digit % New qualitative guide
Organic sales growthQ1 2025—Flat to slightly down New near-term view
Share repurchasesQ1 2025—~$400M New buyback plan
Structural cost savingsFY 2025—~$60M (program total ~$175M) New cost action cadence
Industrial Coatings share gains2H 2025—>$100M annualized share gains New share wins in outlook
DividendNext payment—$0.68 per share payable Mar 12 Dividend reaffirmed

Note: FY 2024 prior guidance (adjusted EPS $8.15–$8.30) was maintained in October; the company has now reset guidance for FY 2025 .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3 2024)Current Period (Q4 2024)Trend
Digital/technology & subscriptionRefinish share gains; strong Performance Coatings; mention of digital tools impact (refinish) +600 Moonwalk installs (>2,500 total), growing subscription revenue; advantaged digital-tech subscriptions supporting pricing/margins Positive momentum, scaling
Tariffs & raw materialsUneven macro; soft global industrial production; general input moderation Enacted tariffs drive low single-digit raw material inflation; pricing expected flattish-to-slightly positive in Q1, low single-digit positive for 2025; supply chain remains loose (buyer’s market) Manageable inflation; pricing actions
Automotive OEM demandHigh-single-digit declines (Q2); double-digit declines (Q3) in U.S./Europe; partial offsets China/Mexico High-single-digit decline; stabilization expected in 2025 per industry forecasts; volume recovery weighted to 2H Still soft; stabilizing later
AerospaceBacklog ~$290M; record sales; capacity debottlenecking (Q3) Backlog ~$300M; double-digit organic growth; sustained demand tailwinds Strengthening
Europe ArchitecturalLow-single-digit decline (Q2); flat in Q3 (positive trend) Low-single-digit decline; aiming for stabilization rather than “hockey stick” recovery Stabilizing, mixed by country
Mexico (Comex)Record sales/earnings; strong economy; distribution network Robust demand; expanding pull-through of Traffic/PMC/Refinish via 5,200 concessionaire locations Strong and broadening
ChinaLow-to-mid-single-digit growth; share gains (Q2/Q3) Positive volume, share gains with domestic OEMs; EVs ~37% of builds; local-for-local exposure Consistent growth
Cost actions & structureCorporate expenses lower; ongoing cost savings initiatives ~$175M program, ~$60M benefits in 2025; European manufacturing consolidation aiding productivity Increasing benefit through 2025
Capex—Elevated near term (~$750M midpoint) for catch-up and growth (Mexico resin, aerospace, refinish, digital; European consolidation), normalizing back to ~3% of sales longer-term Near-term elevated; normalizing later

Management Commentary

  • “We delivered ninth consecutive quarter of segment margin and segment EBITDA margin expansion.” (Tim Knavish, CEO) .
  • “We anticipate a slow start to 2025… expect to deliver organic sales growth of a low single-digit percentage for the year… deploying about $400 million toward share repurchases during the first quarter of 2025.” .
  • “Our Global Architectural Coatings and Performance Coatings segments, both now have full year EBITDA margins at or above 20%… Industrial Coatings delivered 16% EBITDA margin despite weak industrial macro.” (Prepared remarks) .
  • “In Auto Refinish… share gains more than offset by lower industry collision claims… added more than 600 additional Moonwalk installations… now total more than 2,500… adding to our subscription revenue.” .
  • “We expect to deliver adjusted earnings per share for the full year in 2025 in the range of $7.75 to $8.05… EPS growth will be weighted towards the second half of 2025.” .

Q&A Highlights

  • Pricing vs tariffs: Enacted tariffs (TiO2, epoxies) imply low single-digit raw material inflation; company expects low single-digit positive pricing in 2025 and flattish-to-slightly positive in Q1; supply chain remains loose (buyer’s market) .
  • Margin cadence: Q1 margins down vs full-year trajectory; progression improves as volumes stabilize and Industrial Coatings benefits in 2H .
  • Capital return & M&A: ~$400M Q1 buyback funded by proceeds; M&A remains selective and not “tip of the spear”; emphasis on organic growth; management views stock undervalued vs optionality .
  • EPS growth algorithm: Targeting sustainable 8–12% EPS growth long term; 2025 operational EPS growth 7% with FX headwind ($0.33 EPS) and first-half softness .
  • Regional exposures: Comex is nearly 100% domestic Mexico; leveraging concessionaire network to push PMC/Traffic/Refinish products; LatAm strong, India JV with Asian Paints leveraging technology; China local-for-local exposure and share gains with domestic OEMs (EV content tailwind) .

Estimates Context

  • Wall Street consensus (S&P Global) for Q2–Q4 2024 EPS and revenue was unavailable at time of access due to SPGI daily request limit. As a result, we cannot quantify beats/misses versus consensus for Q4 2024 at this time [SPGI request error].
  • Actuals anchor: Q4 adjusted EPS $1.61 and net sales $3.73B; Q3 adjusted EPS $2.13, net sales $4.58B; Q2 adjusted EPS $2.50, net sales $4.79B .

Key Takeaways for Investors

  • Mix/quality: Despite soft volumes, adjusted EPS and segment margins improved YoY, reflecting pricing power via technology/digital solutions and cost actions; Performance Coatings is the bright spot with aerospace strength and refinish subscriptions .
  • Near-term setup: Q1 2025 expected flat-to-slightly down organic growth with tariff-driven cost inflation; EPS/margins weighted to 2H, supported by >$100M Industrial Coatings share gains and ~$60M cost saves .
  • Capital return: Aggressive buybacks (~$400M in Q1) plus $0.68 dividend provide downside support; FY24 buybacks totaled ~$750M (~3% of shares) .
  • Portfolio focus: Divestitures (silica, U.S./Canada architectural) sharpened margin/growth profile; new segmentation improves visibility; expect stabilization in EMEA architectural and continued Mexico/China tailwinds .
  • Industrial watchpoints: Index-based price resets and weak auto/industrial production weighed on Industrial Coatings margins; management expects moderation as pricing anniversaries and volumes stabilize .
  • Risk monitors: FX headwinds (Q4 adjusted EPS had ~$0.05 drag; 2025 FX cited); enacted tariffs, macro uncertainty, and Europe consumer confidence remain key variables .
  • Medium-term thesis: Targeted 8–12% sustainable EPS growth underpinned by margin profile (two segments ≥20% EBITDA), organic growth muscle, and cost/operational excellence; Capex elevated near term for catch-up/growth, normalizing to ~3% of sales longer term .

Appendix: Additional Financial Notes

  • Q4 adjusted EPS reconciliation: Adjustments include acquisition amortization ($0.10), restructuring-related costs ($1.35), portfolio optimization ($0.15), legacy remediation ($0.01), insurance recoveries (-$0.01) .
  • Q4 tax: Reported effective tax rate 86%; adjusted effective tax rate 22% .
  • Q4 adjusted EBITDA: $594M (15.9% margin) vs $606M (15.5%) in Q4 2023 .
  • Cash flow and balance sheet highlights (FY24): Operating cash flow $1.42B; capex ~$721M; YE cash $1.27B; long-term debt $4.88B .

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