On Thursday, CFRA, increased its price target for PPG Industries (NYSE:PPG) shares, a leading coatings and specialty materials company. The new 12-month price target is set at $40.00, up from the previous $35.00, while the company maintains a Buy rating on the stock.
The adjustment in the price target to $40 reflects a change in the EV/EBITDA multiple from 7.7x to 8.0x, applied to the updated 2024 adjusted EBITDA forecast of $1,509 million, which indicates a significant year-over-year increase of 46%. This is an upward revision from the prior estimate of $1,415 million.
The firm also raised its earnings per share (EPS) projections for PPG Industries for the years 2024 and 2025, with the 2024 EPS now forecasted at $3.21, up from $2.87, and the 2025 EPS at $3.32, up from $3.04.
The revised estimates and target price take into account strong wholesale prices for chicken and a favorable margin landscape. There appears to be steady demand in both retail and foodservice sectors due to the scarce availability of alternative proteins, especially beef. On the supply side, limited production growth is anticipated, which is expected to support healthy pricing dynamics.
CFRA highlights that PPG Industries' margins are poised for improvement, benefiting from lower feed costs as corn and soybean prices have significantly dropped over the past year. Additionally, the company is likely to face reduced pressure from labor and wages compared to previous years.
The report also notes that margins in Europe have become structurally stronger following major restructuring initiatives, although it acknowledges that margins in Mexico may experience volatility each quarter.
Despite a rally of over 25% in the share price this year, CFRA believes there is further upside potential for PPG Industries' stock. The company's strong performance and favorable market conditions have contributed to the positive outlook and the revised price target.
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