Wholesale inflation is cooling while gas prices tick higher, and that mix is shaking up expectations for interest rates and profit margins. For companies that feel every move in input costs, this matters. Some could see pressure ease if producer prices stay contained, even as demand and wages remain under strain. This article walks through three stocks exposed to these inflation trends and explains why they may deserve a closer look right now.

The stocks covered below are just a starting sample, since the full screen surfaced 335 more companies with equally compelling narratives that are not covered in this article. To identify and analyze those additional industrial and manufacturing stocks that are most sensitive to input costs, head straight into the U.S. Input-Cost-Sensitive Industrial and Manufacturing Stocks screener.

PPG Industries (PPG)

Overview: PPG Industries is a global coatings and specialty materials company that supplies paints, protective finishes, adhesives and other coating systems for everything from homes and offices to cars, airplanes, ships and industrial equipment across major regions worldwide.

Operations: PPG Industries generates most of its revenue from Industrial Coatings at about $6.7b, followed by Performance Coatings at about $5.7b and Global Architectural Coatings at about $4.0b.

Market Cap: $25.5b

PPG Industries sits at the crossroads of easing wholesale inflation and still elevated raw material costs, which matters when petrochemicals and pigments drive a big share of its cost base. Management has already reported mid single digit raw material deflation and is working to lock in better volume deals with suppliers, while maintaining pricing power across aerospace, protective and industrial coatings. At the same time, high debt levels and ongoing wage inflation could limit how much of that input cost relief turns into lasting margin expansion. In addition, the company has a 54 year dividend growth streak and has conducted recent buybacks, and PPG starts to look like a business where input cost trends and pricing discipline could be more important than headline revenue growth.

PPG’s raw material relief, pricing discipline and long dividend growth record hint at a story the market may not be fully pricing in. Before assuming those tailwinds flow cleanly to shareholders, review the 5 key rewards and 1 important warning sign

Build your own input cost shortlist like PPG Industries

PPG Industries and the other two stocks in this article all came from a single screener, but the real edge is in building filters that fit how you think about risk, pricing power and margins. Use our flexible Screener to mix metrics like valuation, growth, balance sheet strength, risks and dividends, or lean on the curated themes inside our Investing Ideas.

Dow (DOW)

Overview: Dow is a global materials science company that produces plastics, chemicals and coatings used in everyday products like packaging, construction materials, cars and consumer goods across major regions worldwide.

Operations: Dow generates most of its revenue from Packaging & Specialty Plastics at about US$20.9b, followed by Industrial Intermediates & Infrastructure at about US$11.3b, Performance Materials & Coatings at about US$8.4b and Corporate at about US$691m.

Market Cap: US$22.1b

Dow sits at the heart of the input cost story. As a large user of energy and petrochemical feedstocks, easing wholesale inflation and softer core input prices can feed directly into better margins, especially after the company finished a US$1b cost savings program and reported its most profitable quarter in four years. At the same time, Dow is coming off a period of losses, carries higher risk funding and pays a dividend that is not yet comfortably covered by earnings, so the turnaround still has execution risk. For investors watching how cost cuts, asset optimisation and a new CEO’s playbook meet a cooler inflation backdrop, Dow offers a focused test case worth studying more closely.

Dow’s cost reset and cooler input prices could be masking a much sharper earnings swing than many expect. To see how that mix shows up in the numbers and key pressure points, review the 3 key rewards and 2 important warning signs (1 is major!)

Sherwin-Williams (SHW)

Overview: Sherwin-Williams develops, manufactures, and sells paints, coatings, and related products to professional contractors, industrial customers, commercial projects, and retail buyers through its own store network and third party channels across multiple regions worldwide.

Operations: Sherwin-Williams generates about $13.9b of revenue from its Paint Stores Group, $9.0b from Consumer Brands Group, $7.1b from Performance Coatings Group, and records an unallocated administrative charge of $5.6b, with most sales coming from the United States at $19.4b versus $5.1b from foreign markets.

Market Cap: $86.9b

Sherwin-Williams offers a direct way to gain exposure to easing wholesale inflation because its raw materials basket of resins, solvents, and pigments has been reported as down by low to mid single digits in recent years, which can add support for margins when paired with firm pricing. The company is still heavily exposed to North American housing and DIY trends, carries meaningful debt, and has seen insider selling, so rich valuation multiples and leverage leave less room for error. At the same time, management is opening new stores, investing in R&D, and striking partnerships such as the Square PRO+ tie up, while earnings and guidance have been reported as moving in the right direction. The overall story centers on how these factors interact with cooler input costs and any potential future demand softness.

Sherwin-Williams appears to be a pricing and margin story that many investors only partially recognize, with cooler input costs alongside leverage and rich expectations. Get the full picture in the 2 key rewards and 2 important warning signs

Curious About Alternatives You Might Be Missing

Fresh stock ideas do not stay under the radar for long. Spot potential breakout momentum plays and pockets of value before the crowd catches on. Act now.

• Target income streams that could hold up when headlines turn noisy by scanning a curated set of potential yield opportunities with the 11 dividend fortresses.
• Hunt for potential mispriced opportunities hiding in plain sight using a carefully filtered pool of quality companies surfaced through the 51 high quality undervalued stocks.
• Get ahead of developments in automation by tracking businesses involved in robotics using a focused collection of stocks in the 40 robotics and automation stocks.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.