What happened

Shares of PPG Industries (NYSE:PPG) dropped 10.2% in January, according to data provided by S&P Global Market Intelligence, after the paint and coating company presented a bleak outlook for 2020. PPG is concerned about weak industrial demand as well as customer-specific issues including Boeing's 737 MAX production halt.

So what

PPG reported fourth-quarter results that fell just short of estimates, but the market's attention was focused on the company's forecast for 2020. PPG said it expects first-quarter earnings of $1.32 to $1.42 per share, below the $1.53 consensus, and for the year, expects earnings of $6.47 to $6.78 per share. Wall Street had expected the company to earn $6.87 per share this year.

A collection of powdered coatings on a pallete.

Colored powder coatings. Image source: Getty Images.

CEO Michael McGarry said he believes PPG is holding up well "in spite of weakening global manufacturing activity that impacted many of our industrial end-use markets," but PPG warned the issues it saw in 2019 are likely to continue into the new year.

"At the outset of this year, we are beginning to see a modest recovery in China industrial demand but expect weak general industrial demand to continue in Europe and the U.S.," McGarry said. "We will continue to aggressively manage our businesses based on these forecasts."

Now what

PPG certainly doesn't have high hopes for 2020, but at least some on Wall Street believe the company is being overly pessimistic. Baird analyst Ghansham Panjabi said he believes the initial guidance likely was the result of "early year conservativism," and that he expects volume improvements as the year goes on.

If he is right, there is likely upside to the shares as the year goes on. Of course, there is also a growing amount of uncertainty surrounding the coronavirus and its potential impact on the global manufacturing economy that could offset any gains.

Short of the U.S. falling into a recession, PPG shares appear to have limited downside from here. But it makes sense to watch how the year develops instead of buying in right now.