How PPG suffered during the subprime crisis
The subprime crisis that began in September 2008 shook the financial world and pushed the global economy into recession. PPG Industries (PPG) was no exception, and the stock price suffered during the crisis. From September 1, 2008, to January 31, 2009, PPG Industries stock fell by 42%.
PPG’s peers Valspar (VAL), RPM International (RPM), and Sherwin-Williams (SHW) fell by 27.5%, 43.2%, and 21.4%, respectively, in that period. PPG stock suffered due to its exposure to the automotive and architectural sectors. Those sectors suffered the most during the crisis. However, by the end of 2009, all the above stocks recovered and were trading at pre-subprime crisis prices.
Insight into PPG’s stock performance since 2009
Since 2009, PPG Industries has given a return of approximately 222.3%. In 2012, the stock had the highest return of 62%. The stock rose from $41.75 at the beginning of 2012 to $67.67 at the end of the year. It posted $15.2 billion in revenue and an adjusted net income of $1.2 billion.
During this period, PPG continued to focus on its coatings business and acquired AkzoNobel’s North American architectural coatings business. It also acquired Spraylat, a North American industrial coating company.
The worst year for PPG in terms of stock performance was 2015, with returns of -14.5% for the year. Faced with a tough economic environment, its revenues remained stagnant at $15.3 billion. With zero revenue growth, the fall in adjusted income impacted the stock price.
Analysts expect PPG’s 12-month target price to be $123.50 since PPG keeps investing in growth projects. It’s continuing to acquire more small and medium-sized coating companies to fuel its revenue growth and maintain its leadership in the coatings segment.
You can hold PPG indirectly by investing in the SPDR S&P 500 ETF (SPY), which has 0.15% of its holdings in PPG Industries as of August 26, 2016. In the next part of the series, we’ll look at PPG Industries’ revenue classification.