Trimming Coatings Est. on Volume Risk; RM Inflation Risk Remains

Citi caught up with coatings companies into 3Q26 earnings season. The group has seen relative weakness in September with higher oil, rate hikes and continued pockets of weakness in housing, autos and Europe. Citi trims 3Q/4Q EPS estimates across the group by ~2% primarily due to modestly weaker auto OEM/industrial, global architectural, and auto refinish volumes, and lowers 2027 EPS estimates by ~2%, assuming more modest growth in industrial & building & construction end-markets, while still assuming EPS/EBITDA growth into 2027 with price/cost expansion likely significant in 2H27. On raw materials, as oil prices reach back towards $100/bbl, Citi acknowledges that more persistent inflation could be the norm and believes the peak in raw materials inflation could extend to 4Q26 and 1Q27, though its house view of mid-$60s Brent in 2027 should see deflationary tailwinds. EU demand remains weak, tracking down LSD in 3Q and likely soft through 4Q. Higher rates (10-yr yield above 5%) raise ris