PPG Industries Q3 2026: prices caught up with costs, segment profit +10%, EPS $2.12 (+8%)

Prices caught up with costs, and profit followed

PPG, the Pittsburgh paint and coatings maker, grew third-quarter 2026 net sales 6.6% to $4,353 million and diluted earnings per share from continuing operations 8% to $2.12, a third-quarter record. The change from last quarter is that sales growth finally reached profit. In Q2, sales rose 7% but EPS slipped because selling-price increases covered only about 90% of rising raw-material costs. This quarter the earnings release says PPG's "commercial actions fully offset the impact of cost of goods sold inflation", a quarter earlier than the Q4 target management set in July.

Sales growth came from four sources, per the release: higher selling prices (+3%), higher volumes (+2%), a weaker dollar making foreign sales worth more once converted (+1%) and acquisitions (+1%). Organic sales, meaning growth from the existing business without currency and acquisitions, rose 5%, the seventh quarter of organic growth in a row. This release is the earnings announcement (8-K); the full 10-Q, with regional sales and management's discussion, is not filed yet.

Key figures

PPG does not report an "operating income" line, so the operating margin is our calculation, the same method as our Q2 report: pre-tax income of $631 million plus interest expense of $67 million minus interest income of $45 million gives $653 million, or 15.0% of sales (versus $579 million, 14.2%, a year earlier). PPG's own EBIT figure in the release is also $653 million. EBITDA, used in the guidance, is earnings before interest, taxes, depreciation and amortization; "adjusted" means PPG has also removed items it considers outside normal operations.

Segments: two up sharply, industrial squeezed

Global Architectural Coatings (paint for homes and buildings, mainly in Europe, Latin America and Asia) grew sales only 4%, and volumes fell 2%, but prices rose 4%. Profit rose 22% because higher prices and "productivity actions" (footprint optimization and structural cost cuts in Europe, per the CEO) outran cost inflation. Latin America and Asia Pacific organic sales grew by a mid-single-digit percentage, with Mexico again strong in retail and project sales; Europe grew by a low single-digit percentage on price while volumes fell. This is a margin story, not a demand story: the segment sold less paint and earned more on it.

Performance Coatings turned around the most. In Q2 its segment income fell 7.6% as car-refinish sales (paint sold to body shops) dropped by double digits. In Q3, organic sales rose 8% on volumes (+5%) and prices (+3%), and segment income rose 22% to $332 million. Refinish organic sales grew by a mid-single-digit percentage. Aerospace coatings organic sales grew by double digits, with the order backlog still "near $300 million", and protective and marine coatings rose by a high single-digit percentage, their 14th straight quarter of volume growth. Traffic solutions (road-marking paint) declined. Acquisitions added 2% to segment sales.

Industrial Coatings (paint applied in factories: car bodies, appliances, drink cans) is where costs still bite. Volumes rose 2% and prices 2%, and organic sales grew 4% on share gains: packaging coatings by double digits, general industrial coatings by a high single-digit percentage. Automotive OEM coatings organic sales fell by a low single-digit percentage, though PPG says that still beat global car production. Segment income fell 14% to $200 million and the margin dropped 2.6 points to 11.5%. Many industrial contracts reset prices from raw-material indexes with a delay, so price increases arrive a few quarters after the cost increases. PPG expects more margin compression in this segment in Q4.

What the headline numbers hide

• The tax rate took about $0.09 off EPS. The effective tax rate rose to 24.2% from 21.2%, which includes a small charge for the expected resolution of a tax matter. Pre-tax income grew 13.5%, but net income from continuing operations grew only 6.5%. At last year's rate, Q3 net income would have been about $19 million higher.
• GAAP growth beats adjusted growth because last year carried a write-down. Reported EPS rose 8.2% and adjusted EPS 5.6%. The gap comes mainly from Q3 2025: PPG took $24 million of impairment and related charges on a consolidated joint venture in Performance Coatings, half of which fell on the partner's share. This year's adjustments are smaller: $20 million after tax of amortization of acquired intangibles, $11 million of restructuring, a $2 million tax-matter charge, and small gains from an asbestos insurance recovery and the sale of a non-core business. On an adjusted basis, pre-tax income rose 7.0% and adjusted EBITDA 6.9%, about in line with sales. Margins held; they did not expand.
• A discontinued-operations loss sits below the headline. PPG booked a $22 million loss from discontinued operations (against a $9 million gain a year ago), so total net income attributable to PPG was $451 million, slightly below last year's $453 million. Total diluted EPS was $2.02 versus $2.00. The release does not say what the loss relates to. Continuing-operations figures are the right measure of the ongoing business, but this is $0.10 a share of real cost.
• Buybacks added about 1.5 points of EPS growth. Diluted shares fell 1.5% to 223.2 million. PPG bought back $322 million of stock in the first nine months, about $147 million of it in Q3 (we derived this by subtracting the $175 million H1 figure in the Q2 10-Q). That is under half last year's $687 million pace. Dividends were $482 million for nine months, about $165 million in the quarter.
• Cash and working capital look healthy. Cash from continuing operations was $1,160 million for nine months, up 11%, about 90% of the period's $1,294 million of continuing net income. Receivables (+3.7%) and inventories (+2.5%) grew more slowly than sales over the year, and operating working capital fell to 19.1% of annualized sales from 19.6%. Net debt was $5.2 billion, about $200 million lower than a year earlier.

On balance the quarter is clean: adjusted EPS rose 6% and GAAP EPS 8%. The gap comes from last year's joint-venture impairment not recurring, and a higher tax rate roughly cancels it out.

Did last time's read hold up?

Our Q2 report said to watch two numbers in Q3: the gap between prices and cost inflation, and the Performance Coatings margin, which had fallen 3.2 points. Both moved PPG's way. Pricing fully covered cost inflation in Q3, a quarter ahead of the plan, and gross margin held near flat at 40.5% after a 1.8-point drop in Q2. Performance Coatings' segment margin rose 2.2 points to 21.4%, and refinish sales grew by a mid-single-digit percentage, slightly better than the low-to-mid-single-digit second-half recovery management guided to. Q3 also hit the top of the outlook: organic growth of 5% against "low- to mid-single-digit" guidance, and an adjusted EBITDA margin flat at 18.2%, the better end of "flat to 1 point lower". As expected, Industrial Coatings was the exception, with margins squeezed by index-lagged pricing.

Takeaway: In Q2, PPG's sales grew but profit did not, because cost inflation ran ahead of price increases. In Q3 prices caught up, and combined segment profit rose 10% on 6.6% more sales. Under the 8% GAAP EPS gain, the underlying business grew about 7% on an adjusted pre-tax basis with steady margins. That is a recovery to normal growth, not a step up, and Industrial Coatings, PPG's largest segment by sales, is still losing margin.

Outlook

Management narrowed full-year 2026 adjusted EPS guidance to $7.90–$8.10 from $7.70–$8.10, raising the midpoint to $8.00. For the fourth quarter, PPG expects:

• Company organic sales growth of a low single-digit percentage, led by aerospace, Latin American architectural coatings and packaging coatings.
• Company adjusted EBITDA margin flat to 1 point (100 basis points) higher than a year ago.
• Architectural: organic sales flat to up low single digits, with margin expansion.
• Performance: organic growth of low to mid single digits, with margin expansion from pricing and "automotive refinish stabilization".
• Industrial: organic sales up or down low single digits, with margin compression "due to the timing of index-based pricing".

Adjusted EPS was $4.06 in the first half and $2.25 in Q3, so $6.31 so far. The range needs $1.59–$1.79 in Q4, well below the Q3 figure; the release doesn't give a Q4 2025 comparison to anchor that against. In our view the guidance now looks conservative rather than demanding: two segments are guided to wider margins and pricing already covers inflation. The figure to watch in the Q4 report is the Industrial Coatings margin. If index-based pricing starts to catch up there too, all three segments would be adding to profit growth for the first time this year.