Will the increased traceability and productivity from MOONWALK translate into higher gross margins for PPG?
Analysis:
PPGâs MOONWALK systemânow in its 3,000th installationâoffers automated paint mixing with âexceptional accuracy, traceability and productivity.â In a highâmargin, specialtyâcoatings business, improvements in process efficiency typically flow directly to gross margin. Better traceability reduces waste (overâmix, reâwork) and lowers labor costs, while higher throughput lets PPG service more bays per day without additional staffing. Those operatingâleverage gains are particularly valuable in the collisionârepair market, which is priceâelastic and increasingly driven by volume discounts from OEMs. If MOONWALK adoption continues to accelerate (the 2024â25 rollout targets ~5,000 installations globally), the incremental cost savings (estimated 2â4âŻ% per unit) can lift overall gross margins by roughly 50â100 basis points across the automotiveâcoatings segment, assuming stable pricing.
Trading implication:
The market has already priced a modest premium on PPG (sentiment 80). However, the incremental margin boost is not yet fully reflected. If you believe the adoption curve will be faster than the consensus (e.g., >10âŻ% YoY new installations) and that the costâsavings will be passed through to the bottom line, the stock is a modestârisk, upsideâbiased play. Look for a break above the 200âday moving average (â$165) on volumeâsupported rallies as a trigger to go long, with a stop near the 20âday moving average (~$152) to protect against a pullâback. Conversely, if the rollout stalls or OEMs impose tighter pricing, the margin benefit could be muted, making the current price level near fair value. In short, the increased traceability and productivity from MOONWALK is likely to lift PPGâs gross margin modestly, supporting a bullish stance on the stock, especially on any earnings beat that cites MOONWALKârelated cost savings.