Lowe’s discontinues OLYMPIC
On February 27, 2018, Lowe’s (LOW) announced that it won’t continue selling PPG Industries’ (PPG) OLYMPIC brand paints and stains in its stores—effective in mid-2018. PPG and Lowe’s had a long-standing relationship. Lowe’s has been a primary channel for many of PPG’s brands. However, PPG will continue to supply Lowe’s with specialty building materials.
The sales from Lowe’s account for less than $300 million of PPG’s annual revenue. The move could have a negative impact on PPG’s revenue starting in 3Q18. PPG might fall back on PPG stores, dealers, and other distribution partners to sell its OLYMPIC Brand. Currently, PPG has more than 900 company-owned stores, 4,000 independent dealers, and 8,000 retailer locations.
PPG’s stock price
PPG’s stock price reacted negatively. The stock declined 6.10% and closed at $110.25 for the week ending March 2, 2018. The decline in the stock price caused PPG to trade 4.9% below the 100-day moving average price of $115.91. On a year-to-date basis, PPG has declined 5.60%. PPG’s peers Sherwin-Williams (SHW), Axalta (AXTA), and RPM International (RPM) have declined 4.80%, 3.90%, and 5.50%, respectively.
Analysts expect PPG’s target price to be at $125.90, which implies a return potential of 14.2% from the closing price as of March 2. There could also be an increase in the short interest in PPG stock. Currently, PPG’s 14-day relative strength index indicates that the stock isn’t overbought or oversold. PPG Industries underperformed the Guggenheim S&P 500 ® Equal Weight Materials ETF (RTM). RTM declined 3.60% for the week. RTM has invested 3.80% of its portfolio in PPG Industries as of March 2, 2018.