PPG (PPG) Q3 2026 earnings review
PPG raises its profit plan, but industrial margins still shrink
PPG, the maker of paints and specialty coatings, finally turned sales growth into higher profit by raising prices across its divisions. Sales from businesses owned a year ago rose 5%, and profit per share excluding one-offs climbed 6% to $2.25 after barely moving last quarter. Chief executive Tim Knavish lifted the bottom of the full-year profit outlook, which by our math points to 12% profit growth in the fourth quarter even as underlying sales growth slows to a low single-digit pace.
| Sales from businesses owned a year ago | +5% +7% total net sales ($4,353M) |
|---|---|
| Profit per share, excluding one-offs | $2.25 +6% from a year ago |
| EBITDA margin, excluding one-offs | 18.2% flat from a year ago (plan: -1 to 0 pts) |
| Full-year profit per share outlook | Raised $0.10 middle of the range: $8.00 (+5.5%) |
⚖️ Verdict: 🟢 Bullish
The story got better because a 3% price increase covered raw material inflation one quarter ahead of schedule and house paint margins jumped 3 percentage points. That allowed PPG to raise its full-year profit plan after holding it steady for three quarters. One caution: the largest division, Industrial Coatings, saw its EBITDA margin drop 2.6 percentage points and faces another drop next quarter because its formula-based contracts lag raw material costs.
The question now is whether fast growth in specialty units like aerospace, can coatings and Latin American house paint can keep lifting company profit while European volumes shrink and industrial contracts lag. If those units are big enough, full-year profit per share breaks above its flat two-year band; if they are too small, fourth-quarter slowing pulls growth back down. The first-quarter 2027 industrial margin and full-year 2027 plan will settle it.
🐂 Bull Case
Higher Prices Covered Raw Material Costs Early
PPG makes paints and coatings from petrochemical raw materials, whose costs rose this year during the Middle East conflict. Three months ago, the company covered 90% of that cost increase with higher prices and promised full coverage by the fourth quarter. "During the third quarter, the company’s commercial actions fully offset the impact of cost of goods sold inflation, reflecting pricing discipline across the portfolio," chief executive Tim Knavish said.
The paint maker raised selling prices by 3% from a year ago, up from 2% last quarter. That kept the cost of making the products (cost of sales before depreciation) flat at 59.5% of revenue, while advertising and overhead (selling, general and administrative expense) stayed at 20.1%. Because the fourth-quarter outlook calls for profit margins before interest, tax and depreciation (EBITDA) to stay flat or rise by 1 percentage point, the raw-material squeeze has passed.
What to watch: selling price growth in the fourth quarter. Another 3% reading alongside expanding company margins would show PPG is keeping its price increases as raw material inflation cools.
Latin America and Price Hikes Lifted House Paint
Global Architectural Coatings sells house and building paint in Europe, the Middle East and Africa (EMEA), Latin America, and Asia Pacific. PPG had forecast a flat EBITDA margin for the division this quarter. Instead, the segment's EBITDA margin jumped 3 percentage points from a year ago to 24.0%, lifting segment EBITDA 19% to $253 million.
- Selling prices: up 4% from a year ago across all regions
- Sales volumes: down 2%, as European weakness outweighed Latin American growth
- Latin America and Asia Pacific: underlying sales up by a mid-single-digit percentage on Mexican retail and project demand
- EMEA: underlying sales up by a low single-digit percentage
The margin jump matters because Knavish said European house paint is gaining from "productivity enhancements, footprint optimization, and structural cost actions" even before four European factory closures finish around year-end. PPG also forecast another margin increase for the division in the fourth quarter.
What to watch: European house paint sales volumes in the fourth-quarter report. Positive volume would mean the division is growing through customer demand rather than price hikes alone.
Market Share Gains Drove Factory Paint Volumes
Industrial Coatings sells finishes for car factories, general manufacturers, and food and beverage cans. PPG had forecast flat to low single-digit underlying sales growth for the division because its can-coating unit faced a tough comparison against three straight quarters of double-digit growth. The segment beat that plan with 4% underlying sales growth, split evenly between a 2% volume gain and 2% higher prices.
Can coatings grew by a double-digit percentage again, putting its two-year volume gain above 20%, while general industrial coatings grew by a high single-digit percentage. Car factory paint sales fell by a low single-digit percentage, but Knavish said market share wins kept its volumes ahead of global car production.
What to watch: Industrial Coatings sales volumes in the fourth quarter, where the plan calls for underlying sales to be between down and up a low single-digit percentage. Positive volume would show the new customer wins still outweigh soft factory output.
Car Repair Paint Returned to Growth
Performance Coatings sells specialized finishes for airplanes, ships, bridges, road stripes, and car body shops (automotive refinish). Underlying sales in the division rose 8%—5% from volume and 3% from price—and its EBITDA margin rose 2.2 percentage points to 23.9%. Car body shop paint grew by a mid-single-digit percentage on both volume and price after shrinking in the first half of the year, while protective and marine coatings notched a 14th straight quarter of volume growth.
The body shop rebound helped lift profit, but it measured against a third quarter last year when distributors cut orders and sales fell by a double-digit percentage. One rebound against an easy comparison does not prove that US car crash repair claims have recovered.
What to watch: car body shop volume commentary in the first quarter of 2027, once the easy second-half comparisons pass. Growth then would show end-customer demand has healed.
🐻 Bear Case
Aerospace Backlog Stalled Despite Double-Digit Sales
PPG highlights aerospace coatings—paint, sealants and windows for commercial and military aircraft—as its main growth business, and it is spending more than $500 million to build new factory capacity. In the third quarter, the company said aerospace delivered double-digit underlying sales growth "while our order backlog remained near $300 million".
That $300 million of unfilled orders is unchanged from the second quarter and down from $315 million in both the fourth quarter of 2025 and the first quarter of 2026. By our math, net new backlog was zero this quarter and shrank 3.2% from $310 million a year ago. Management has attributed the flat backlog to factories catching up on orders, but PPG does not report new order intake, so outsiders cannot tell higher factory output apart from slowing customer orders.
What to watch: the aerospace order backlog in the fourth quarter. A drop below $300 million before the new North Carolina plant opens in 2027 would suggest new orders are no longer matching shipments.
Formula Pricing Delays Squeeze Factory Paint Margins
Many Industrial Coatings customers buy under contracts that tie paint prices to raw material indexes after a one- to two-quarter delay. Knavish said the division raised prices 2% this quarter as PPG is "beginning to realize the benefits of lagging index pricing". Even so, high raw material costs caused "year-over-year adjusted EBITDA margin contraction, which is consistent with expectations", Knavish said.
The division's EBITDA fell 11% from a year ago to $251 million, and its EBITDA margin dropped 2.6 percentage points to 14.4%—the third straight quarter of year-over-year margin decline for PPG's largest segment by sales. Because PPG expects another margin drop in the fourth quarter "due to the timing of index-based pricing", the largest part of the business will drag on profit through the end of the year.
What to watch: the first-quarter 2027 margin outlook for Industrial Coatings on next quarter's call. Continued margin decline into 2027 would mean contract formulas are not recovering the full cost increase.
Risks this quarter didn't answer
Five standing concerns around European closures, currency, overhead, buybacks, and legal or environmental costs were either only partly tested or await the quarterly filing.
- European plant closures: four house-paint plants are scheduled to close in late 2026 or early 2027 for $25 million in annual savings, and the release gave no update on the schedule.
- Share buybacks: repurchases doubled from last quarter to about $150 million, but the $322 million nine-month total is still less than half the $687 million spent a year ago.
- Unallocated corporate costs: corporate expense was $92 million against $73 million a year ago, though net interest expense fell to $22 million and beat the $25–30 million plan.
- Foreign currency: currency translation added 1% to sales, down from 2% in the second quarter and 6% in the first, showing the tailwind from a weaker dollar is fading.
- Legacy environmental and legal costs: PPG booked a $22 million after-tax loss in discontinued operations, and any update on the New Jersey Chrome cleanup reserve or the October ethylene-oxide trial sits in the 10-Q filing.
💲 Other KPIs
Nine-month operating cash flow rose $104 million from a year ago. By our math, third-quarter free cash flow (operating cash flow minus capital spending) was $411 million, or 9.4% of sales. Operating working capital—customer bills owed plus inventory minus supplier bills—improved to 19.1% of annualized sales from 19.6% a year ago.
Total debt minus cash and short-term investments fell by about $200 million from a year ago and $100 million from last quarter. The paint group ended September with $1,642 million in cash and short-term investments against $6,841 million of total debt.
Average diluted shares fell 1.5% from 226.5 million a year ago and 0.3% from 223.9 million in the second quarter. The lower share count lifted reported profit per share growth (+8.2%) roughly 1.6 percentage points above net income growth from continuing operations (+6.5%) by our math.
🔮 Guidance
Raised. PPG lifted the bottom of its full-year range by 20 cents, moving the middle of the range up 10 cents to $8.00 (up 5.5% from 2025). It is the first raise after holding the range for three quarters. By our math, after $6.31 in the first nine months, the plan leaves $1.59 to $1.79 for the fourth quarter, or 12% growth at the middle of the range against $1.51 a year ago.
New. The fourth-quarter plan calls for low single-digit underlying sales growth (about 2% at the middle of the range), slowing from 5% in the third quarter. Growth will come from Performance Coatings (+low to mid-single digits) and Global Architectural Coatings (flat to +low single digits), while Industrial Coatings is planned between down and up a low single-digit percentage.
New. Management expects the company EBITDA margin excluding one-offs to be flat to 1 percentage point higher than last year's fourth quarter (15.2%, implying 15.2% to 16.2% by our math), after a flat reading in the third quarter. Margin expansion in house paint and performance coatings will offset further formula-pricing compression in Industrial Coatings.
❓ Key Questions
What drove the $22 million loss in discontinued operations?
PPG recorded a $22 million after-tax loss from discontinued operations ($0.10 per share) in the income statement, against a $9 million gain a year ago, without explaining the charge in the release. Investors need to know whether it stems from legacy environmental or legal reserves.
What was new order intake in aerospace coatings?
Aerospace underlying sales grew by a double-digit percentage, but the order backlog stayed near $300 million for a second straight quarter. Without an order-intake or book-to-bill figure, investors cannot tell whether factory debottlenecking is clearing the backlog or new orders have slowed.
When do Industrial index contracts turn margin-positive?
Industrial Coatings raised prices 2% on lagging index contracts, yet its EBITDA margin still fell 2.6 percentage points and is planned to shrink again in the fourth quarter. How much of the contract book reprices in the first quarter of 2027?
Are the four European paint plant closures on schedule?
Management previously committed to closing four European architectural plants in late 2026 and early 2027 to cut fixed costs by $25 million a year in 2027. The release mentioned European cost actions but gave no timeline update on the four closures.