PPG Industries (PPG) receives Old York Operational Quality (A) Rating for fiscal year 2025
(A) | Materials | Chemicals (Coatings)
By: Old York Financial
A Private Principal Research Report
the verdict
Old York Financial has assigned PPG Industries (PPG) an Operational Quality (A) Rating. PPG is a "Machine in Transition." In 2025, the company maintained flat revenue of $15.9 Billion, but reported a 17% jump in net income to $1.57 Billion. It earns a (A) because it is successfully high-grading its portfolio, shedding commoditized house paint to double down on high-margin sectors like Aerospace, which saw double-digit growth. For the Principal, PPG is an "Efficiency Play." It returned $1.4 Billion to shareholders in 2025 and has paid dividends for 125 consecutive years, though its 21% ROE lacks the explosive "Leverage Multiplier" seen at Sherwin-Williams.
the old york analysis
owner earnings: the industrial cash flow We look at the cash produced by PPG’s global manufacturing footprint. The machine is throwing off significant liquidity despite the divestiture "Friction."
2025 Operating Cash Flow: $1.90 Billion (Up $500M YoY)
(-) Capital Expenditures: ($0.78 Billion)
(+) Depreciation & Amortization: $0.65 Billion (Estimated)
OLD YORK OWNER EARNINGS: $1.77 Billion
Analyst Note: The Free Cash Flow Yield of 5% is solid. PPG is a "Cash Collector." By selling the U.S. architectural business and the silicas segment, PPG is cleaning out its "Clogged Pipes." The goal is to funnel this cash into the $380 Million North Carolina aerospace facility, where the "Right to Win" is much higher.
operational efficiency
ROIC (Return on Invested Capital): 16.7%
ROE (Return on Equity): 21.4%
Net Profit Margin: 9.9%
Performance Coatings Margin: 18.6% (Aerospace & Marine leading the charge).
Industrial Coatings Margin: 12.2% (Steady, but sensitive to global OEM volume).
Analyst Note (The Margin Gap): While a 21% ROE is healthy, it is significantly lower than Sherwin's 75%. This is because PPG operates as a Manufacturer/Supplier, lacking the high-margin retail "Front End" that SHW controls. PPG’s efficiency is tied to "Formula Innovation" rather than "Store-Front Dominance."
growth & market dominance
2025 Consolidated Revenue: $15.88 Billion (Flat, but +2% Organic).
The Aerospace Moat: Achieved record sales in 2025 with an order backlog of $315 Million. PPG is one of the few machines capable of meeting the rigorous specs for the next generation of widebody aircraft.
The "One-PPG" Cost Program: Realized $75 Million in savings in 2025, with another $50 Million targeted for 2026.
Divestiture Impact: Removing the $2B architectural segment will improve the "Quality of Earnings" by removing a low-margin, high-volatility anchor from the U.S. portfolio.
the fortress check
Total Assets: $15.6 Billion (LTM).
Cash & Short-Term Investments: $2.2 Billion (A healthy "Safety Tank").
Net Debt: $5.1 Billion.
Capital Allocation: Returned $1.4 Billion to the Principal ($790M in buybacks, $610M in dividends).
Dividend History: 53 consecutive years of increases. PPG is a "Reliable Utility" for the Principal’s portfolio.
final determination
Rating: Old York Operational Quality (A)
Classification: The Specialist Pivot.
PPG is a (A) because it is a "Blue-Chip Survivor." It lacks the "Monopoly-Lite" retail power of Sherwin-Williams, which prevents a (AA) rating. However, its dominance in Aerospace and its aggressive portfolio management prove that the "Principal" in charge (CEO Tim Knavish) is focused on ROIC rather than just size.
Disclaimer: Old York Financial operates privately as a principal and sells corporate advisory. Old York Financial is not an accountant, a financial advisor, a broker, an agent, a lawyer, or a portfolio manager. This report is for informational purposes only.
