The Sherwin-Williams Company (SHW) on Q3 2022 Results - Earnings Call Transcript

Operator: Good morning. Thank you for joining The Sherwin-Williams Company's review of third quarter 2022 results and our outlook for the fourth quarter and full year of 2022. With us on today's call are John Morikis, Chairman and CEO; Al Mistysyn, CFO; Jane Cronin, Senior Vice President, Corporate Controller; and Jim Jaye, Senior Vice President, Investor Relations and Communications. This conference call is being webcast simultaneously in listen-only mode by Issuer Direct via the Internet at www.sherwin.com. An archived replay of this webcast will be available at www.sherwin.com, beginning approximately two hours after this conference call concludes. This conference call will include certain forward-looking statements as defined under US federal securities laws with respect to sales, earnings and other matters. Any forward-looking statement speaks only as of the date on which such statement is made, and the company undertakes no obligation to update or revise any forward-looking statement whether as a result of new information, future events or otherwise. A full declaration regarding forward-looking statements is provided in the company's earnings release transmitted earlier this morning. After the company's prepared remarks, we will open up this session to questions. I will now turn the call over to Jim Jaye. Jim Jaye: Thank you, and good morning to everyone. Sherwin-Williams had an excellent performance in the third quarter, including high-teens sales growth resulting in the first $6 billion sales quarter in company history; significant, sequential and year-over-year gross margin improvement, record adjusted diluted earnings per share and strong cash flow. Demand remains strong in pro-architectural and North American industrial end markets in contrast to continuing softness in Europe and China. While year-over-year cost inflation remained very significant in the quarter, we were encouraged by a modest sequential decrease in raw material costs. The industry supply chain also continued to stabilize, though conditions remain tight with some previously noted specialty resins in particular remaining in limited supply. Throughout the quarter, our team continued to focus on growth initiatives, product innovation, customer solutions, pricing actions, cost control, supply chain improvements and business optimization activities while also taking actions and planning for a wide range of scenarios that could unfold next year. I'd like to go through just a few of the numbers at a high level and then turn it over to John, who will provide some additional color on the third quarter and our outlook. Comparisons in my comments are to the prior year period unless stated otherwise. Starting with the top line. Third quarter 2022 consolidated sales increased 17.5% to a record $6 billion. Pricing was in the low double-digit range. Consolidated gross margin increased to 42.8%. This was an improvement of 120 basis points year-over-year and 110 basis points sequentially, reflective of our pricing actions. Gross margin improved sequentially month-to-month in the quarter, with September increasing 650 basis points year-over-year. SG&A expense decreased to 25.3% of sales. Consolidated profit before tax increased $265.7 million or 43.5%. Diluted net income per share in the quarter was $2.62 per share versus $1.88 per share a year ago. Excluding Valspar acquisition-related amortization expense, third quarter adjusted diluted net income per share increased 35.4% to $2.83 per share versus $2.09 a year ago. EBITDA in the quarter was $1.12 billion or 18.6% of sales. Moving on to our operating segments. Sales in The Americas Group increased 21.4%, driven by double-digit volume growth across all architectural end markets and high single-digit price increases. Segment profit increased by $132.6 million and segment margin was 21.2%, which was about flat with last year and up 30 basis points sequentially. Sales in the Consumer Brands group increased 8.5%, driven by a low double-digit price increase, which offset lower sales volumes, primarily outside of North America. Continued tightness in alkyd resin impacted North America stain and aerosol sales. Adjusted segment margin was 16.2%, up 150 basis points year-over-year and 500 basis points sequentially. Sales in the Performance Coatings Group increased 13.7% and were driven by mid-teen price increases, partially offset by a less than 1% decrease in volume. Mid-single-digit sales from acquisitions were offset by a mid-single-digit unfavorable FX impact. Adjusted segment margin increased 590 basis points to 16.4% of sales, due primarily to higher selling price increases. Let me now turn it over to John to provide some additional commentary, before we move on to your questions. John Morikis: Thank you, Jim, and good morning, everyone. As we've indicated since the start of the year, we expected 2022 would be a year of two contracts to have, and that's exactly what we're seeing play out. We delivered strong results in the third quarter, and I want to thank our entire leadership team and all 61,000 employees for their focus, their determination and drive in what remains a challenging operating environment. We continue to have great confidence in our strategy. Before moving on to our outlook, let me provide some additional color on our third quarter. In The Americas Group segment, we delivered record sales and PBT. Mid-teens volume growth and high single-digit pricing drove sales, which were up by a strong double-digit percentage in every end market we serve. The sales growth was led by DIY, which was compared to an extremely soft quarter a year ago, where we prioritized our Pro customers given limited product availability. Sales growth was next strongest in our property management, followed by new residential, residential repaint and commercial, respectively. Sales were also up by a double-digit percentage in Protective & Marine, but were dampened by the ongoing limited availability of alkyd resin. We are seeing strong effectiveness from the 10% price increase we announced September 6. TAG segment profit increased due primarily to double-digit paint volume growth and selling price increases, partially offset by increased raw material costs and higher SG&A costs related to continued investments in our long-term growth initiatives and our strategy. From a product perspective, exterior and interior paint sales were both strong, with exterior sales growing slightly faster and interior being the larger part of the mix. We've opened 32 net new stores year-to-date and expect to open 40 to 50 in the fourth quarter. We continue to invest in our management training program, expecting to hire more than 1,400 college graduates that will enter this program this year and who will be the future leaders of the company. We also added sales reps and territories in the quarter, along with ongoing growth investments in innovative new products, e-commerce and productivity-enhancing services. Our Consumer Brands Group had a much improved quarter, led by sales that exceeded our guidance. Sales in North America increased by a double-digit percentage, driven largely by price. DIY paint demand remained sluggish, as inflation continued to pressure consumers, while continued tightness in alkyd resin impacted our ability to produce stains and aerosols. On a positive note, the Pros Who Paint segment again grew by a strong double-digit percentage. Sales in China were down by a double-digit percentage, due mainly to the COVID-related lockdowns. Europe was also down double digits due to the slowing macroeconomic environment. Segment margin improved significantly, primarily due to selling price increases and good cost control, partially offset by lower sales volume, increased raw material costs and higher supply chain costs. The Performance Coatings Group followed a very good second quarter with another strong performance in the third. Sales were up mid-teens, including mid-teens pricing and a mid-single-digit benefit from acquisitions, partially offset by a very slight decrease in volume in a mid-single-digit impact from unfavorable FX. For the second straight quarter, this team delivered year-over-year segment margin improvement, driven by execution of our strategy, including effective pricing actions. The 16.4% adjusted margin in the quarter was the highest for the segment since the acquisition of Valspar. And excluding the impact of acquisitions closed over the last 12 months, adjusted segment margin was 17% in the quarter. Although, we're pleased to have reached the low end of our expressed margin target of high teens low 20s. We know there's a significant amount of opportunity ahead. I'm proud of our team's efforts to reach this goal and know they understand the high expectations we have for continued improvement. Sales varied significantly by region. In North America, sales increased double digits against a challenging comp and included low single-digit volume growth. Latin America sales also increased by double digits against a strong comp. Sales were up high single digits in Asia, driven by price as COVID lockdowns continue to impact demand. Sales in Europe were backward mid-single digits against a double-digit comparison and continued economic slowing. Every division in the group grew led by coil and followed by packaging, auto refinish, general industrial and industrial wood. We're also pleased by what we're seeing so far from the recent acquisitions we've announced in this segment. Again, these businesses added mid single-digit growth in PCG sales in the quarter though this was nearly all offset by unfavorable FX. Earlier this month, we announced an agreement to acquire ICA, a high-quality European business focused on innovative wood coatings. Before moving to our outlook, let me speak to capital allocation in the quarter. We returned approximately $203 million to our shareholders in the quarter in the form of dividends and share buybacks. We invested $48 million to purchase 200,000 shares at an average price of $237.81 per share. We distributed $155.8 million in dividends. We also invested $175 million in our business through capital expenditures, including $125 million in core CapEx and $50 million for our building our future project. We closed three acquisitions in the third quarter for approximately $440 million. We ended the quarter with a net debt-to-EBITDA ratio of 3.1 times as we increased short-term borrowings to fund our recent acquisitions. We'll drive the ratio to our long-term target of 2 to 2.5 times range in 2023. We will use cash in the fourth quarter of 2022 to manage debt and share buybacks will be done to offset option dilution. Turning to our outlook. We expect to deliver a very solid fourth quarter, resulting in our second half sales increasing by a low double digits to mid-teens percentage. And second half diluted earnings per share increasing by 35% at the midpoint of our guidance. Within The Americas Group, demand is strong across all of our pro-architectural markets, including new residential, despite higher interest rates, with customers reporting strong backlogs that will take them through the end of the year and likely longer. We also see a unique opportunity to continue winning new business as our competitors transition their pro contractor business models and our differentiated model has never been more on display in value than it is today. Within the Consumer Brands Group, we expect the North American DIY consumer to continue to face inflationary pressures and Europe and China remain challenging. Within the Performance Coatings Group, demand remains strongest in North America, our largest region. European demand slowed in the third quarter, and we expect continued softness in the fourth quarter. In Asia, the pace of recovery from prior COVID lockdowns in China and prospects for additional lockdowns make it difficult to assess demand trajectory. From an industry supply chain perspective, we're largely getting the raw materials we need, though the availability of alkyd and some specialty resins remain choppy and is impacting certain product lines within Consumer Brands and Performance Coatings. While we continue to push hard, we don't expect meaningful improvement in the availability of these resins until the first quarter of next year. Some near-term inefficiencies remain in our own supply chain as we continue to take steps to overcome industry issues and serve our customers. On the cost side of the equation, our full year raw material inflation guidance remains in the high teens. We expect to see further sequential decline of raw material costs in the fourth quarter, though they will remain elevated year-over-year. We expect the trajectory of raw material costs to continue trending favorably as we exit the year, although the pace and level of potential relief next year is difficult to project. Additionally, along with the highest inflation rate we've seen in 40 years, we're also experiencing significant higher costs and other elements of our cost basket, including labor, transportation and fuel and other costs. We will continue to monitor these costs, fight hard to offset them and respond with additional pricing, if necessary. So specifically for the fourth quarter of 2022, we expect our consolidated net sales will increase by a high single to low double-digit percentage, inclusive of a low double-digit price increase. We expect The Americas Group to be up high teens to low 20%. We expect Consumer Brands to be down a mid to high single-digit percentage, and we expect Performance Coatings to be flat to up a low single-digit percentage. We expect North America, which is the largest region within PCG, to be up a low teens percentage. For the full year 2022, we expect consolidated sales to increase by a low double-digit percentage, inclusive of a low double-digit percentage price increase. We expect The Americas Group to be up by low double digits to mid-teens percentage. We expect Consumer Brands Group to be down a low single-digit percentage and Performance Coatings Group to be up by a low double to mid-teens digit percentage. Given the many variables we've noted, we left our diluted net income per share guidance for 2022 unchanged and in the range of $7.65 to $7.95 per share. Full year 2022 earnings per share guidance includes Valspar acquisition related amortization expense of approximately $0.85 per share. On an adjusted basis, we expect full year 2022 earnings per share of $8.50 to $8.80, which represents mid single-digit percentage growth from 2021 at the midpoint in what continues to be a challenging macro environment. This guidance implies a second half adjusted diluted net income per share of $4.63 per share at the midpoint, an increase of 35% over the same time period last year. In addition, we provided updated guidance on several of our full year data points in our slide deck, including our expectations for FX, CapEx, interest expense, depreciation and amortization. We expect our full year tax rate will remain in the low 20% range. While we're not prepared to provide any specific guidance on 2023 at this time, I would like to comment on demand trends and actions we're taking that will impact our 2023 outlook that we will provide in January. We expect slowing new residential demand with elevated interest rates and other costs that are impacting new single-family home permits and starts. However, multifamily production has maintained strong momentum. It's also clear that macro headwinds are likely to continue and potentially worsen in Europe and China. Our base case in this environment remains to prepare for the worst and hope for the best. I'm highly confident in our leadership team, which is deep in experience and has been through many previous business cycles. We've transformed our business in many ways since the last significant downturn, and we are now a stronger, more resilient company. We know what to do. To this end, we've been evaluating multiple options available to us based on a wide range of scenarios, and we are prepared to take appropriate actions beginning this quarter. These include the following we continue to review our portfolio of businesses, brands and customer programs to ensure that they are adding above-market growth and long-term shareholder value. As a result of this work, we are announcing action plans to simplify our operating model and portfolio of brands in Consumer Brands Group and to reduce costs in all regions in Performance Coatings Group, Consumer Brands and administrative segments. These actions, once finalized, could include one-time costs or charges in the range of $160 million to $180 million over the next four quarters, and could result in annual run rate savings of approximately $50 million to $70 million once fully implemented. Additional details on these planned actions are outlined in the slide deck issued with our press release this morning. We will call out significant one-time charges and update our progress on run rate synergies on future quarterly earnings calls. We remain committed to our strategy of providing innovative solutions that help our customers to be more productive and profitable. In challenging environments, we have the opportunity to become an even more valuable partner to our customers. We will continue to focus on new account growth and share of wallet initiatives. We will leverage our strength in recession resilient end markets, including residential repaint, property management, packaging and auto refinish, all of which are larger than they were in previous cycles. We will continue to invest in growth initiatives, including adding stores, sales reps and innovative products and services. We will continue to invest in our people, including our management trainee program I previously mentioned, along with ongoing training that positions our people as one of the most significant amongst our many points of differentiation. We will continue implementing appropriate pricing actions across the company to offset persistently higher input costs, with a focus on regaining our gross margins back to our long-term target range of 45% to 48%. We will continue investing in acquisitions that can accelerate our long-term strategy and top-line growth, and expand our operating margins, including our most recent announcement of European Wood Coatings leader, ICA Group. We will maintain our disciplined capital allocation philosophy. We will not hold cash, while investing appropriately in CapEx, paying a dividend, targeting acquisitions that accelerate our strategy and absent M&A buying back our stock. In sum, we expect to deliver a solid fourth quarter to complete a very strong second half of 2022, and we're also taking actions to get ahead of what could be a challenging 2023. We don't expect to be immune from any number of potentially difficult scenarios, but what we do expect is to outperform our competitors and the market. We will do this by leveraging the best team in the industry. We remain committed to creating shareholder value over the long term. And that concludes our prepared remarks. At this time, we'll be happy to take your questions. Operator: Ladies and gentlemen, the floor is now open for questions. Your first question for today is coming from Vincent Andrews. Vincent Andrews: Thank you. Just a question on TAG and the margin, both sequentially and year-over-year. You saw a lot more improvement in margins in the other two segments. I mean you didn't TAG. So I was wondering why that was. I did notice you called out some long-term investment spending in TAG that might have affected that. So perhaps, you could talk about that a little bit as well in terms of what that is? And whether it carries over, not just in the 4Q but into next year as well? Al Mistysyn: Yes, Vincent, this is Al Mistysyn. Yes, I mean, we saw a little over 20% increase year-over-year in our segment profit. Flow-through is a little in the low 20% range, and it typically is the case. We had higher sales volumes, which generally drives improved operating margin. I've historically talked about a low to mid-single-digit volume gain, getting in a normal state environment, mid- to high 20%. We had one really month of selling price increases, but these are still partially offset by the higher raw material costs that we had talked about being sequentially better, but still up maybe a mid-single digit in our fourth quarter. And really, the higher SG&A costs that we called out are the continued investments in long-term growth initiatives. So we've added 67 stores. We've put in over 80 reps. We've added headcount into our stores to support the growth outlook. And as John mentioned, we're going to add and really accelerate our growth in the fourth quarter by adding 40 to 50 new stores. So what I would expect in the fourth quarter is, you're going to see your normal seasonal slowdown in architectural demand, which is typical, and you also see a sequential decline in operating margin, but we expect stronger flow through in our fourth quarter, really upwards of over 30%. And you get a full quarter of the 10% price increase for -- that was implemented September 6. I would tell you, that price increase is going even a little better than what we had seen in the past, the fourth quarter sequential moderation of raw material costs and an easier comp. So you're going to see bigger year-over-year improvement in our operating margin in the fourth quarter. And you're going to see that SG&A growth into the first half of next year, and we'll give you more color on that in January. Vincent Andrews: And just as a follow-up, we talked a lot about raw material shortages for a year now, and part of what you were doing this year was trying to get your TAG inventory back to a comfortable level to service your customers. Are you there now? And given that maybe a lot of that was done over the last quarter or two when raws were peaking, should we be thinking about you carrying sort of peak COGS inventory into next year's spring season, or how should we think about the cadence of sort of lower raw material costs flowing through in TAG specifically? John Morikis: Vincent, I'll take the inventory piece first, and I'll show it to Al to talk to the accounting. Yes, we're in a very good place right now for the majority of our products. I mentioned earlier, the issue that we continue to face with the alkyd resin and some of the specialty resins, we'll fight through that. It's getting better. As I mentioned earlier, we expect to have the majority, if not all of that behind us, at the end of the first quarter. But for the most part, the remaining portion of our product line is available for our customers. You should -- and I know you do know Sherwin-Williams, our model is not to unlock the door and hope that people are finding their way back into our stores to find them. Our sales reps and store managers are very aggressive in the hunt of pursuing customers, both existing and new to share with them the fact that we have these products available for them. Al Mistysyn: Yes. And Vincent, we actually built a little bit of inventory from our second quarter to our third quarter, which is typically not the case. But to meet the strong demand that we're seeing, specifically within TAG with mid-teen volume growth in our third quarter and high -- low double-digit we expect in our fourth quarter, I think what you're going to see us do is try to manage our architectural inventory by year-end, maybe up another 4 million gallons. The reality of that is, we're going to monitor that very closely as the quarter progresses and look at demand trends specifically going into our first half next year, and we may adjust that number a little bit. And that's specifically to the DSCs. Our store level inventories are in great shape. We are meeting our demand -- our strong demand with high service levels, and we expect to continue to do that. But as you can imagine, we're -- as our inventories get in better shape, we'll get back to managing our working capital. Our working capital at the end of the third quarter is over 12%. We're going to target to try to drive that down between 11% and 11.5% by year-end, but still a very strong inventory position going into next year. John Morikis: And Vincent, this ties also back to your first question on the SG&A to Al's earlier point. We are continuing to invest in people to provide the service in the stores. So, as the product becomes more available, you may recall in the last couple of quarters, we talked about the new account activity at record levels and active accounts. So, now we've got a lot more people coming into our stores, new accounts coming in. We've got product available. We want to make sure that we have the service to deliver on our promise. And so they're all interrelated, and they're all working very well. Vincent Andrews: Great to hear. Thanks guys. Operator: Your next question is coming from Truman Patterson. Truman Patterson: Hey good morning everyone. Thanks for taking my questions. First, clearly, there are a lot of moving parts on raw material inflation between suppliers, the petrochem oil. But John, you mentioned the trajectory of raw material cost that's trending favorably as you exit the year. Can you just help us understand at this point in time what the gross margin basket or the raw material -- sorry, raw material basket might look like exiting the year sequentially versus kind of third quarter levels? Jim Jaye: Yes, Truman, this is Jim. I'll take that one. So, if you look at our third quarter, the raw material basket was up by mid-teens percentage year-over-year. I think as we get into the fourth quarter, we're looking at that being more like a mid-single-digit year-over-year number. I think, as John said in his prepared remarks, the trajectory is good and heading in the right direction. I think it's hard to project exactly what it's going to do next year. We're trying to still formulate that, and we'll come back to you in January with our full year guide to give you some more color on that. John Morikis: Yes. Truman, I'd just add to that. As we typically do and our planning for the upcoming year, we work with our suppliers closely on looking at demand trends, looking at volume trends by region, and it gives us a better line of sight as we get through the end of the year. And that's why January, we are able to give you a much better outlook on the raw material basket and other input costs, quite honestly, as we've talked about. Labor rates have been up high single digits, and in some cases, across our supply chain, low to mid teens in an effort to reduce turnover, which is very expensive, but the expertise that goes with that turnover and then freight and other transportation costs. So, we'd like to talk about the full basket as we get into January, and we'll have a better line of sight to that. Truman Patterson: Okay. Okay. Perfect. And then, you all mentioned some of the cost control initiatives in PCG and CBG in preparation of a slowdown, right? Savings of $50 million to $70 million annually. I'm hoping you can walk through those in a bit more detail. And then also, assuming volumes turn negative or remain negative through '23, how does that impact your thoughts on kind of decremental operating margins for both of those segments? John Morikis: Yes. Truman, I want to be careful about getting into too much detail on this call. I mean, we're making these decisions in our fourth quarter and going forward. And it's -- as we talked about on our second quarter earnings call in July, it's part of our normal earning process that we continue -- and as John talked about, we continue to assess these portfolio of business brands and customer programs and their ability to drive above-average market share growth and the operating margin and cash flow targets we set for them. And if we don't see that happening, we take action similar to what we did with the -- exiting the East private label business, the sale of our Australia and New Zealand business architectural. I would say, on the run rate savings, more of that is due to the portfolio review than what I would call more purely cost reductions, and that's relative to the macroeconomic headwinds we're seeing. And it's probably a 60-40 split. And why I think that's important is because, we're not overreacting to the macro environment. It means that we are driving operating margin improvement across consumer brands, across the PCG. And I would even venture to say that within PCG, yes, as John talked about, we hit the low end of the high teens of 17%. We have more work to do. This -- these actions we're taking in the coming quarters is not related to our long-term high teens, low 20 operating margin. This is really in response for the slowdown we're seeing in Europe and Asia. So we have opportunities to grow with platform consolidations. As we integrate these acquisitions going into next year, they'll start to be accretive as we get to the second half. So, if we see additional slowdowns in demand, we have more levers to pull to offset any decremental operating margin. So... John Morikis: Yeah. And Truman, I’d answer this point as well. When you heard Al talk about not overreacting, I think your question is a good one, but I'd also point out that there are many areas of our business that we're actually continuing to invest and in some accelerating investments. So the leadership that we have, the ability to view and see where those opportunities are, I think, comes with a great deal of experience and what we're doing. And so we just talked about adding stores as an example. We'll have 35 new stores in the fourth quarter -- I'm sorry, 40 to 50 this year, this fourth quarter compared to 35 last year. And if you look at the staffing that we just talked about investing in digital programs that we're investing in. So we are making, we believe, the appropriate steps in reducing where we need to, but we're also investing in those areas that are appropriate. Al Mistysyn: The only other comment I'd make, Truman, related to that on the one-time cost. We'll call those out as we have typically done in the past, specifically even with the Valspar integration. So we didn't put them in the guidance in the fourth quarter. There are estimates. The timing is uncertain. We're pushing the teams pretty hard to take action and get these done, but we'll call them out over the next quarterly calls, and we expect to get approximately 170 over the next four quarters. Truman Patterson: Perfect. Thank you all and good luck in the upcoming quarter. John Morikis: Thanks Truman. Operator: Your next question for today is coming from Josh Spector. Josh Spector: Yeah. Hey guys, thanks for taking my question. A question on the Performance Coatings guidance. I guess, when I look at things sequentially, normally, it's relatively stable. You guys maybe have a 10% decline. Understanding things are getting worse in some of the regions, but I think when I look at some of the competitor guidance, things were already pretty bad in 3Q, and generally things stay bad into 4Q. Your guidance implies things are getting worse. So I'm wondering if you can maybe dig into some of the details there about getting worse or maybe your 3Q was helped by some items, which go away? Al Mistysyn: Yeah. Josh, I think where we're seeing maybe a little bit more of a slowdown would be in Europe and Asia. And I think our largest region, North America, we talked about being in the low to mid-teens and price will start to annualize, so you don't get as much of a tailwind on price. Our comps are still pretty strong in our fourth quarter relative to last year. And so I don't know there's a significant step change that we're seeing other than -- I think we've got to be prepared and try to look at -- based on our history and what we've seen over the last few years is maybe a little bit wider range on sales as we go into the fourth quarter with the holidays and things of that nature. So I don't want to read too much into that other than maybe a little less price as we get into the fourth quarter and then a little bit worsening outside of North America. John Morikis: Well, I do think, to Al's point, if you look at the comps, if you take, for example, our packaging business, we had a high single-digit growth this past quarter versus strong double-digit comp. If you go into next quarter, fourth quarter comps last year were up over 30%. We've got a lot of momentum here in this business. We expect it to continue to win with our customers and grow with them. If you look at coil at a similar situation, fourth quarter last year, comps were up 20% coming off of a strong double-digit growth here as well. So there are some really strong performances here up against some really strong comps, and we think that these teams are continuing to grow in a pretty challenging environment. Josh Spector: Okay. Got it. Thank you. John Morikis: Thanks, Josh. Operator: Your next question for today is coming from Jeff Zekauskas. Jeff Zekauskas: Thanks very much. In the fourth quarter, should your average prices in TAG be up about six percentage points sequentially? Al Mistysyn: No, Jeff. I think what what's going to happen is, we're going to get the full quarter of 10%. We're going to annualize the August 2021, 7%. We're going to annualize the September 4% of last year's surcharge. So when you net them all together, it's about flattish quarter-to-quarter or high single digit. Jeff Zekauskas: I'm sorry, the fourth quarter of 2022 relative to the third quarter of 2022? Shouldn't – since your prices are lifting, you increased prices 10% in early September, shouldn't you capture that all sequentially? No? Al Mistysyn: We are, but we're also annualizing some of the price we took last year. So from quarter-to-quarter, our dollars will be higher. I agree with that, but it's still in the high single-digit range for TAG. Jeff Zekauskas: Okay. And then in terms of raw materials, can you frame the alkyd resin sales and EBITDA penalty for 2022? And is TiO2 – are TiO2 prices going down sequentially in any area other than Asia? Jim Jaye: Yeah. I'll take the TiO2 piece, Jeff. What we did see in the quarter was some inflation that's happening. I think as we go forward, it will depend on some of the softening demand that we're seeing. And I think it's part of our overall view that TiO2 should start to be part of that basket that starts to moderate. The alkyd piece, I'll let Al. Al Mistysyn: Yes, Jeff, I think the alkyd impact. I mean, it could be around 1% on top line. It's – we're having to make choices. So, as an example, why it's difficult to pinpoint it. We're – there's a broad basket of alkyd, and we're somewhere getting fully what we need. Others, we're not. And it's just trying to look at ordering and reorders and things like that. So I think it's about 1% on the top line. The bottom line, I don't think we've quantified or really going to quantify at this time. Jeff Zekauskas: Okay. Great. Thank you so much. Al Mistysyn: Thanks, Jeff. Operator: Your next question for today is coming from Ghansham Panjabi. Ghansham Panjabi: Thank you. Good morning, everybody. I guess, first off, starting off with TAG and the various sub-verticals within there, residential repaint has been a very strong grower for you for many years. I think part of that has just been due to higher home prices and consumers accordingly investing in what typically is your biggest asset. So just based on that, how do you think that category evolves as higher mortgage rates start to impact housing prices perhaps on the downside going forward? John Morikis: Ghansham, I might say it remains positive. If you talk with our contractors, they look at the backlog ahead, and they feel it's a terrific opportunity for them to continue to grow. The LIRA, if you look at the forecasting they have, is for double-digit growth for the remainder of 2022 going into 2023. I would agree that there's some projections that remodeling may slow down mid-2023, but I'll also remind you that paint represents a terrific project to have high impact of relatively low cost. And while rates are moving, house price appreciation has also moved as has the aging of housing. The stock -- aging stock home price -- values, I'm sorry, let me do this. The aging home continues to require more remodeling, more updates, people aging in place, and we see that. You see it in the NAHB, which has slowed just a bit, but still well above 50. And while existing home sales have slowed against strong comps, it's largely because of lack of inventory. And when people have a tendency to stay in home, they'll continue to invest in those homes. Res repaint, we've often talked about, is the largest segment in the professional sub-segment space. It's a great opportunity for us. These customers respond very well to our personal approach of selling with our store managers and our sales reps. Our focus here is pretty simple, and why we have confidence is that we focus on the services and the solutions that allow these customers to be more successful. And I mentioned just a moment ago about the new accounts and share-of-wallet, these are accounts that are responding well to us. And I mentioned earlier, the innovation, I thought I'd just share one really quick one with you as an example, because here in Cleveland, we've just experienced a pretty dramatic swing from cold weather to warm weather. And we've introduced a product called Latitude with Climate Flex Technology, and it's a terrific product that fits, and I think it's a great example of why we continue to grow. We're responsive to these customers' needs, and this is a product that can be applied anywhere from 35 degrees all the way up to 120 degrees with the same application, same flow, same hiding, same appearance. And so what you end up is with customers that understand we're really focused on making them successful, launching products that help them on projects longer, allowing them to work later into the season. And this product with very minimal warning, if it starts to rain usually within a few hours, not even about 30 minutes actually, the product is resistant to moisture. So these are just small examples, but it really allows us to demonstrate how we're moving the needle and why we have confidence in continuing to move the needle in this space. Ghansham Panjabi: Okay, thanks for that John. And just for my second question, just on your comments on pricing effectiveness, which sounds like it's better than your initial expectations. What do you attribute that success towards in context of just the visible sort of plateauing of some of the inflationary numbers out there with oil prices stabilizing, et cetera? John Morikis: Well, it's really simple. It's not a 30-minute discussion. We don't win or lose our price increase on how well we talk to them about the price increase in a pricing meeting. It's everything that I just talked about. Every day, we earn the value that our customers are willing to pay us for our products and services. And so the fact that we're out there helping them to be more successful, more profitable, when our costs go up, they understand that we're doing everything we can. Every customer that does business with Sherwin-Williams should know, we're doing everything we can to drive our costs down in both raw material and every other item in that basket. But when we're with them in a meeting to talk about pricing, it's because we need it. We've done everything to offset it, but what's most important is, we're helping them to be successful and we're partnering with them in their business. And so yes, we're more effective now because we're helping our customers to win. Ghansham Panjabi: Thanks John. Operator: Your next question is coming from Kevin McCarthy. Kevin McCarthy: Yes, good afternoon. John, last year, I think you spoke about adding 50 million gallons of architectural coatings capacity. Can you provide an update on that? Has any of it come online? And if so, what percent is loaded these days? John Morikis: It is online. It's allowed us, as Al mentioned earlier, to build inventory at a time where we typically would have been running flat with demand outside of Orlando, a terrific team. I got to hand it to our entire supply chain team for the great work they did in getting that capacity up and running as quickly as they did. It's pretty well utilized. We don't talk to the specifics, but we run a 10-year model out on capacity. And this capacity was needed, came in perfectly at a great time, and it's allowed us to be responsive to our customers. We've got more capacity coming in, in Statesville, which will allow us to further meet the growing demands that we're projecting. And again, I hope that you see exactly what we see, which is confidence in our ability to deliver and the investments to support the demand that we're going to create. Kevin McCarthy: Okay, that's great. And then secondly, if I may, I wanted to talk a little bit about the acquisition activity that you've done. I think you mentioned three bolt-ons closed during the quarter. What is the aggregate sales contribution that you would expect from those in 3Q and 4Q? And based on your margin comments and performance, it sounds like maybe the acquisitions feature significantly lower margins, is that correct? And if it is, maybe you can talk about the game plan to raise those to the company average or beyond over time. John Morikis: Yes. Let me start with the latter part of your question. I'll go over to Al to talk about the first piece. You're right, when we split out the acquisitions, it was to highlight to our investors our ability to reach the commitments that we've been talking about. In fact, when we first announced the Valspar acquisition, we painted a picture that we were proud of the performance of our TAG business and that we expected to drive this industrial business in that direction, citing our desire to get into the high teens, low 20 operating margins. The fact that we've reached adjusted backing out, to your point, the last 12 months of acquisitions up into the 17, there's no one popping corks here. We're not done. We know that, and it's one quarter. We understand that as well, but it clearly demonstrates what it is that we're out to do and how we're doing it. The fact that we've reached 17%, we think, is an indicator of where we are. And I will tell you where we're going is higher. The fact that we backed out these acquisitions should, in fact, indicate that we believe in these acquisitions. Some of them are as little as 30 or 60 days old, and we've not had the opportunity to drive the synergies that we know we can drive into these acquisitions. We're making these acquisitions with a long view in mind. We're not trying to add on the first 30 days of their joining our family. Do we expect them to be contributing what it is that we expect them to do? We buy them with a goal of bringing our synergies and plugging them into our platform, driving more volume out and cost reductions and synergies in. So, we're excited about these wonderful companies, the people that have joined our company as well as the technologies they bring, and we will drive those in the right direction, and they will contribute to our profit. Al Mistysyn: Yes, Kevin, the acquisitions that we've had to date have added a little over 1.5% in the third quarter, expected to be similar in the fourth quarter. When I look at PCG, that would -- they would add about a mid-single-digit percentage. And just to highlight John's point, I mean, we spent over -- or about $630 million for the year on acquisitions. Most of that are two-thirds in the third quarter. John Morikis: The offset, as we talked earlier, to those acquisitions is in FX. So, about even if you're looking there just at the scoreboard. Kevin McCarthy: That’s helpful. Thank you. John Morikis: Thanks, Kevin. Operator: Your next question is coming from John McNulty. John McNulty: Yes, thanks for taking my question. So, there's been a tremendous number of price hikes and announcements throughout the year at different times. So, I guess, can you help us to think about, if no further price hikes were announced, how should we be thinking about what the pricing in 2023 is year-over-year? Just to kind of help us to level set a little bit, just given how much you've been putting through. Al Mistysyn: Yes. John, with all the annualization, you'd expect mid-single-digit price effectiveness as you roll off the February 2020 increase and annualize this last increase along with each of the price increases we went out with through the other regions and segments. Right now, that's our estimate. John McNulty: Got it. Okay. No, that's helpful. And then earlier, I guess, in the prepared remarks, you spoke to some of the e-commerce investment that you're making. I guess, can you give us an update as to some of the investments that you're making there? And how that market seems to be evolving at this point? We know it's still relatively early in that process, but I guess an update there would be helpful. John Morikis: Yes, John, I think what's important to understand is that our e-commerce initiative is not just a transaction. It's more than selling paint. The ability to transact over a platform like that is table stakes and ours goes well above that. It's a much broader approach towards trying to tie in the entire ecosystem that we bring. So that last mile delivery through our local store is something that we want to be able to deliver in, but we're reaching in to the contractor base that we have relationships with, and we're beginning to conduct more and more business along with the rep and the store manager in a very unique and differentiated way. We want these customers living on our platform, running their business on our platform and seamlessly doing business with us as a result of that, and it's working quite well. We've got a number of painting contractors, as well as a lot of national accounts that are that are really dialing into our platform. There'll never be a finish line to this. We're investing pretty heavily right now, but that -- as we're ramping up, it's part of our plan that will stabilize and diminish over time. But right now, we think we're in such a unique position with our store platform and the ability to conduct business in a way that no one else can that we're excited about it. We're leveraging it and more and more people are using that. John McNulty: Great. Thanks very much for the color. John Morikis: Thanks John. Operator: Your next question is coming from Christopher Parkinson. Christopher Parkinson: Good morning. Can you just hit on your broader expectations, whether it's 4Q or 2023, on what you're hearing in your general industrial businesses? Perhaps, just parsing out various content from geographies and then also more consumer versus core industrial businesses, it would be particularly helpful. Thank you. John Morikis: Chris, our industrial business, I would say, I talked just briefly about our packaging, but our packaging non-BPA coating is continuing to gain great traction. We mentioned that we're investing in this business. We've got great relationships with our customers here, and we are investing alongside with them with great agreements that allow us to really collaborate well and to grow with them. There's strong growth, for example, in beverage in both North America and Europe as the preference more and more moves away from other containers into aluminum cans. The Euro Food Safety Association opinion in Europe is also driving an increased demand for non-BPA coatings. We think that continues through 2022 and 2023. So this is a really, really unique technology, great customers. We've got a wonderful team here that's really executing very well. We're excited about this business. The coil business has been up double digits in seven of the last eight quarters. I mentioned earlier that we're facing some tough comps here with a 20% comp in the fourth quarter, but we're not running for the quarter. We're running this for years to come. We're really excited to hear again about this leadership team as well as the technology. Our solutions here have allowed us to be much more responsive to our customers. Quicker turns, smaller batches, works well in the face of adversity for our customers, and that's where we're headed, allowing them to be more responsive to their customers. So it's working very well. Our industrial wood business is another area that we believe we're growing share. Kitchen cabinets is a big part of this business. It's still positive now, but we do expect to see a little bit of slowdown in this business as new residential slows down. Furniture same way, we are growing share. But as new residential slows down, that will have an influence on industrial wood. There are other opportunities, though. We see a terrific opportunity in industrial wood flooring to continue to grow. Building products is our share position there offers tremendous opportunity. We do have a good position here in Europe, and so as Europe impacts industrial wood, we'll feel that in our industrial wood business. Auto refinish, I would say, there's a very high demand, and we're really pleased with this team and the job we're doing here. We know we're growing share here, particularly in North America, where our shop count is growing dramatically. There's a shortage here of body techs and parts that's having a material impact on backlogs, but our results in this business are terrific. And this is another one where we have a very similar model in our automotive as we do our TAG business with our controlled distribution. So our ability to serve and be responsive to our customers along with the shift that we're seeing, very positive mix shift towards our premium products gives us great confidence in this business. The combination of the Valspar and Sherwin technology that came together is really helping us win in auto refinish. GI, general industrial, strong demand here in heavy equipment expected through 2022 and 2023, especially large in ag and construction. And certainly, as you would expect, has been positive impacted by -- positively impacted by the infrastructure opportunities that exist. And then finally, in Protective & Marine, we're really pleased with what's happening here. Demand is strong in all end markets, oil and gas, water, wastewater. Again, same issue here as far as an opportunity in multiple high-value infrastructure opportunities. Solutions here go a long way as well. Our customers are willing to pay for products that help get them off the job quicker either with less coats, quicker recoat times, whatever it might be. We've been investing in this business in the flooring business. We're putting together a nice portfolio of technologies, services and capabilities that we believe will, again, further help us to differentiate. Our model here, again, is also differentiated, particularly in North America, where we have our store platform to use a distribution where many of our competitors are trying to drop ship in large orders. Our customers can work with our teams and leverage the local Sherwin-Williams store to source product and have it there when they need them, and our teams are working really well together on that. So, a lot of momentum here. We clearly see some pressures in the market as you look at Asia and Europe, and what's happening in those. We're not going to be immune to those, but we absolutely do believe where we expect and hold our teams accountable to outperform the market, and we have a lot of confidence that we'll be able to do that, and we're making investments to help support them doing that. So we're feeling pretty good about this. Christopher Parkinson: That's very helpful color. Just as a very brief follow-up, there's been a lot of debate regarding pent-up demand in both resi and commercial repaint. Can you just quickly assess what you're currently hearing from your customers in terms of backlog, longevity, scope? I mean there's been kind of some rumors about the scope of certain projects, especially on the resi side actually expanding for people that are waiting a lot of time. Can you just give us your latest assessment on what you're hearing from your customers? And what -- how that drives your confidence at least into year end? Thank you so much. John Morikis: Well, Chris, hold on one second before you just gauge. Are you talking about new residential? Christopher Parkinson: No. Resi repaint and commercial repaint, I apologize. John Morikis: Okay. Got it. Well, commercial and resi repaint, I'd say, the underlying demand on commercial is strong. Projects are resuming and starts are positive. If you look at the Dodge Momentum Index, it's strong positive for every month in 2022 in the ABI, the Architectural Billing Index. And I'm sure you all know that's the index that really the metric for how architects are billing has been positive for 20 straight months. So that typically means projects in the next 9 to 12 months are going to be coming out of the ground and the fact that, they remain positive, we believe, is a good sign. Customers who are positive, they're still reporting delays resulting from some labor and material shortages that we are seeing a terrific opportunity for our products. Infrastructure spending here as well is strong and schools, airports, hospitals and also areas such as data centers, our position here is strong. Again, we really leverage our platform. We leverage our specification teams. We're calling on architects and continuously drive new products for customers that allow them to be more productive on the job. The combination of those local stores, reps and really great stable of products. I've got to hit it to our innovation team. It continues to do that. I know, they've been gathered just in the last couple of days, talking about how they can continue to add more to our success, and they're doing a wonderful job doing that. So I want to call out to them as well. As it relates to the residential repaint side, as I mentioned earlier, it's still positive. We see contractors in our stores every day. They're talking about the strength through the balance of the year and turning the corner into next year, still a pretty good backlog. I'd say that, if we talk to them about bidding and what's in the pipeline and really dial into our CRM to understand that, I'd say, what we've been witnessing is more and more the project scope has increased. So the size of the projects continue to grow, I think some of that might simply be – I finally found a contractor that will come give me a quote, and I'm not going to let him out just doing my living room. I want to have them do the entire house or expanded areas that they may not have planned on in the past. The quality of the leads seem to be going on. So there's – our contractors would refer to it as less tire kicking. There's people that, they are interested in projects, interested in getting quotes, and starting these projects right away. So we're very aggressive in pursuit of these customers. We feel as though our right to win and our value proposition is strong and getting stronger, and we're looking forward to continuing to leverage this. One last point I would make is that, we – our head is not in the sand here. The call out that we're making for adjusting our expenses and everything that we're doing, I think, highlights exactly the fact that we're grounded in reality. I will say, this though that when we exited the last slowdown, in the last recession, we did a postmortem and really tried to understand what is it coming out of the next slowdown. We want to be prepared with, and how would we be better positioned to withstand the next slowdown. And so throughout the period, 2008, 2010 period all the way to now, we've been working strategically on how do we better position the company. And when you look at residential repaint, it's a much larger percentage of our business now, and that’s because when we – through the last one, new residential, while we've been successful and we've been growing in our success there, we wanted to offset this and diversify our business a little bit more. So we've been hard at work, driving more and more residential repaint. And now it's a larger percentage of our business, and we think it's going to allow us to weather storms much better than we have in the past. Christopher Parkinson: Thank you as always. John Morikis: Thanks, Chris. Operator: Your next question is coming from David Begleiter. David Begleiter: Thank you. Good morning. Al, should gross margins be up in Q4 sequentially? Al Mistysyn: Yes. Yes. And part of that, David, is the full impact of the 10% price increase. We do have a softer comp, but really, you also have a strong low double-digit volume in TAG, which is our highest margin segment. So we should see a nice -- better flow-through, if you will, in our fourth quarter relative to our third quarter in TAG, which will help drive that gross margin up. So yes, I'm expecting sequential and a bigger year-over-year improvement in our fourth quarter and possibly even getting to the low end of that long-term 45% to 48% range. David Begleiter: Very good. And John, just on the Home Depot PPG relationship, has there been -- have you seen any negative impacts in your business in terms of business losses or share losses? John Morikis: Well, I would say this. Our belief is that we're in a really, really good position. We've been working hard, developing our approach towards a controlled distribution model that allows us to differentiate. When we're doing our job, we would expect people to react and change their models. And when they do that, we like to take advantage of that change. We think we're executing really, really well. We think people are reacting exactly the way we'd expect them to react, and we'd say that we're capitalizing on that, and we will continue to capitalize on that. David Begleiter: Thank you very much. John Morikis: Thanks, David. Operator: Your next question is coming from Arun Viswanathan. Arun Viswanathan: Great. Thanks for taking my question. Good morning. I guess, first off, you noted that there could be some challenges in 2023. Could you just describe that a little bit more? Is that a continued slowdown in Europe and China and potentially, that spreading over into North America in the TAG business, or is it mainly still kind of more likely in PCG. I will stop there. Thanks. Al Mistysyn: Yes, Arun, I think we've talked about it. We do expect continued slowdown in Europe and Asia. I think as we get into North America architectural demand, I'd prefer as we've gone through or going through our normal preparation for the coming year in the operating plan to give you a bit more color on that in January. We'll have a few more months under our belt. There's a lot of moving macro trends and things that are happening, and they're moving daily. So rather than try to give you an outlook for 2023 on ARC in the regions, I'd prefer we'd be better prepared to do that in January. I think the fourth quarter, like we talked about, strong high teens, low 20% in TAG and low double-digit volume likely to carry over into the first quarter and then the price of high single digits that we've got certainly carries over into the first quarter. I think that's as far as I think we can go on color. Arun Viswanathan: Okay. That's helpful. And just as a follow-up then, have you seen your customers change their order patterns at all in maybe some different market segments as the backlog actually growing, or is it that they're getting to jobs that maybe that were deferred during 2021 because of lack of availability to raws and labor? Maybe, you can just comment on that. Thanks. John Morikis: Well, there are certainly some of that. And I would say that -- two things: one is, I think we're working much closer with our customers. Adversity brings out the best. Sometimes you have to find it. The fact that we've gotten through this challenging time with raw materials with a closer relationship with our customers, we better understand what projects they're on. In the past, they just walked into the store and they knew they could have it, whatever it was. When they needed it, it was there. As we went through that process of working through the raw material shortages, we were more responsive or better responsive when we understood what the needs of the customers were. So I'd say, the pattern, first of all, for us, it's a closer pattern. We're working better with them. We do see some, I would call it, maybe, they're more fluid. They're moving to projects when they become available and if it's weather changing or getting outside when they can, the fact that they're racing with a pretty sizable backlog. They don't want to take any time off that they don't need to. It's why I mentioned that product that I mentioned earlier, it extends the painting season for them. But I'd say, as it relates to the pattern themselves on the architectural side, we're seeing more frequency, I would say. We're seeing people in our stores more. And on the industrial side, I'd say, we're probably seeing small orders more frequently -- smaller orders more frequently as our customers are trying to prepare for cash management, while being responsive for their teams with their teams or their customers. And again, that works to our advantage, given our model of responsiveness. Arun Viswanathan: Thanks. John Morikis: Thanks, Arun. Operator: Your next question for today is coming from John Roberts. John Roberts: Thank you. A nice quarter. One of your longest lead time planning items is new store openings. I assume you have your sights for 2023 selected. Can you give us some insights into what new stores might look like next year? John Morikis: You're right, we do have that planned out. And I'd say that we're probably get this point going to tell you, it's going to be in the 80 to 100 range. And you'll see those in a combination of metro markets where we're continuing to feed in locations, as well as in some markets where we want to supplement some of the previous investments with added locations for our customers. But you're right, John, as we go into the year, a good portion of those are already identified and the deals are just getting finalized, and we're working through those. So, we're prepared, and again, confidence. Confident in our model, confident in the differentiation of Sherwin-Williams adding stores while others are closing stores and taking advantage of the market opportunities that exist as a result. John Roberts: Okay. And on a one-year comp, the DIY in your stores was obviously very different than the DIY in your consumer segment because a year ago, you were prioritizing the propane or over DIY in your stores. If you looked at a two-year comp, is the DIY in your stores roughly up the same amount as the DIY in the consumer segment on a two-year stack? Al Mistysyn: I think it'd be up higher than that, John. I think we've had really nice strength in that DIY customer within TAG. And the fact that we've been able to do turn on super sales again to bring them in has really helped drive that growth. John Roberts: Great. Thank you, John Morikis: Thanks John. Operator: Your next question is coming from Mike Sison Mike Sison: Hey guys, nice quarter. Just one question for me. You sort of mentioned thinking or sort of managing the business on a worst-case scenario, what would that look like for the stores? Would demand be flat, down, down a lot? And in the event sort of that unfolds, what can you do to help mitigate some of that potential volume decline? John Morikis: Yes. Mike, trying to guess how bad could be is not something that we're going to do on this call. The reality is that we prepare for a number of scenarios. Our view is that, particularly in that store's business that when things get tough, we go hunting. And the reality of a really difficult time in stores might include scaling back on some of the staffing if we didn't have the transaction count or other expenses that we might feel are appropriate. But I would say this that in the 37, soon to be 38 years I've been with the company, our approach has been to take advantage of these situations. I mentioned earlier, the work we've been doing to grow res repaint as a percent of our business coming through COVID, I think it's a great demonstration of what we do in really difficult times. We go find customers. Those customers need to paint to put food on their plate, feed their families. We grow share, we grow active accounts and we outperformed the market. And I'd say, that's what you should expect us to do in difficult times. Al Mistysyn: Mike, I would just add to that. If you, kind of how I frame it, so to speak, is if you go back and look at new residential in 2008 and 2009, where there's a lot of housing speculation and things of that nature, our new res was down in the low 22% range. And as John talked, as we've come
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Citi Lowers Rating on Sherwin-Williams Amid Housing Market Headwinds

Sherwin-Williams (NYSE:SHW) saw its rating cut by Citi from Buy to Neutral, with the price target trimmed to $385 from $405, as analysts flagged ongoing challenges in the housing sector that could weigh on near-term performance. As a result, the company’s shares fell over 3% intra-day today.

Citi pointed to sustained pressure from elevated mortgage rates and delayed expectations for Federal Reserve rate cuts, both of which are dampening hopes for a meaningful housing recovery in the second half of 2025. While the firm still views Sherwin-Williams as a strong long-term player with solid market share potential, current conditions suggest limited upside in the short term.

Without clear near-term catalysts, Citi sees the stock’s risk/reward profile as less compelling and recommends investors consider other names better positioned for today’s macro environment. The firm expressed a preference for RPM International, citing its greater exposure to non-residential construction and infrastructure spending trends.

Sherwin-Williams (NYSE:SHW) Earnings Report Highlights

  • Earnings Per Share (EPS) of $2.09, surpassing estimates.
  • Revenue of approximately $5.3 billion, slightly missing expectations.
  • Strong profitability with a 15.5% improvement in adjusted EPS year-over-year.

Sherwin-Williams (NYSE:SHW), a prominent player in the coatings industry, recently reported its earnings for January 30, 2025. The company achieved an EPS of $2.09, surpassing the estimated $2.06. However, its revenue of approximately $5.3 billion slightly missed the expected $5.31 billion. Sherwin-Williams operates through three main segments: Paint Stores Group, Consumer Brands Group, and Performance Coatings Group.

In the fourth quarter of 2024, Sherwin-Williams reported earnings of $1.90 per share, a significant increase of 36.7% from the previous year's $1.39. Excluding one-time items, the adjusted EPS was $2.09, exceeding the Zacks Consensus Estimate of $2.07. Despite this, the company's revenue of $5.3 billion reflected only a 0.9% year-over-year increase, falling short of the $5.31 billion estimate.

The Paint Stores Group drove the rise in consolidated net sales, but this was partially offset by decreased sales in the Consumer Brands and Performance Coatings Groups. Additionally, a 1.3% negative impact from foreign currency translation affected the overall revenue. Despite these challenges, Sherwin-Williams demonstrated strong profitability with a 15.5% improvement in adjusted EPS from the previous year.

Sherwin-Williams faces a volatile market, as highlighted by Market Watch, with sales falling short of market estimates and soft guidance for the first quarter and the entirety of 2025. This has contributed to a decline in its stock price. The company's financial metrics, such as a P/E ratio of 35.86 and a price-to-sales ratio of 4, reflect investor sentiment and valuation concerns.

The company's debt-to-equity ratio of 2.91 indicates a reliance on debt financing, while a current ratio of 0.83 suggests potential challenges in covering short-term liabilities. Despite these financial pressures, Sherwin-Williams remains a key player in the industry, navigating through market fluctuations and striving for growth.

Sherwin-Williams (NYSE:SHW) Earnings Report Highlights

  • Earnings Per Share (EPS) of $2.09, surpassing estimates.
  • Revenue of approximately $5.3 billion, slightly missing expectations.
  • Strong profitability with a 15.5% improvement in adjusted EPS year-over-year.

Sherwin-Williams (NYSE:SHW), a prominent player in the coatings industry, recently reported its earnings for January 30, 2025. The company achieved an EPS of $2.09, surpassing the estimated $2.06. However, its revenue of approximately $5.3 billion slightly missed the expected $5.31 billion. Sherwin-Williams operates through three main segments: Paint Stores Group, Consumer Brands Group, and Performance Coatings Group.

In the fourth quarter of 2024, Sherwin-Williams reported earnings of $1.90 per share, a significant increase of 36.7% from the previous year's $1.39. Excluding one-time items, the adjusted EPS was $2.09, exceeding the Zacks Consensus Estimate of $2.07. Despite this, the company's revenue of $5.3 billion reflected only a 0.9% year-over-year increase, falling short of the $5.31 billion estimate.

The Paint Stores Group drove the rise in consolidated net sales, but this was partially offset by decreased sales in the Consumer Brands and Performance Coatings Groups. Additionally, a 1.3% negative impact from foreign currency translation affected the overall revenue. Despite these challenges, Sherwin-Williams demonstrated strong profitability with a 15.5% improvement in adjusted EPS from the previous year.

Sherwin-Williams faces a volatile market, as highlighted by Market Watch, with sales falling short of market estimates and soft guidance for the first quarter and the entirety of 2025. This has contributed to a decline in its stock price. The company's financial metrics, such as a P/E ratio of 35.86 and a price-to-sales ratio of 4, reflect investor sentiment and valuation concerns.

The company's debt-to-equity ratio of 2.91 indicates a reliance on debt financing, while a current ratio of 0.83 suggests potential challenges in covering short-term liabilities. Despite these financial pressures, Sherwin-Williams remains a key player in the industry, navigating through market fluctuations and striving for growth.

Sherwin-Williams Price Target Lowered to $423 Amid Demand Recovery Concerns

Jefferies analysts reduced their price target for Sherwin-Williams (NYSE:SHW) to $423 from $439, while maintaining a Buy rating. The adjustment reflects a cautious outlook on the timing of a demand recovery and slightly higher interest expense projections for 2025 and 2026.

The revised estimates stem from concerns that consensus forecasts may overly rely on a macroeconomic recovery in 2025, which the analysts believe could face downward revisions in the coming months. Despite these adjustments, Sherwin-Williams shares appear to have already priced in much of this uncertainty.

Jefferies’ model anticipates a potential rally exceeding 20% by the end of 2025, contingent on supportive Federal Reserve policies and the absence of adverse economic shocks. While near-term caution persists, Sherwin-Williams remains well-positioned to deliver long-term value for investors, backed by its robust fundamentals and resilience in the face of macroeconomic challenges, as per the analysts.

Sherwin-Williams Price Target Lowered to $423 Amid Demand Recovery Concerns

Jefferies analysts reduced their price target for Sherwin-Williams (NYSE:SHW) to $423 from $439, while maintaining a Buy rating. The adjustment reflects a cautious outlook on the timing of a demand recovery and slightly higher interest expense projections for 2025 and 2026.

The revised estimates stem from concerns that consensus forecasts may overly rely on a macroeconomic recovery in 2025, which the analysts believe could face downward revisions in the coming months. Despite these adjustments, Sherwin-Williams shares appear to have already priced in much of this uncertainty.

Jefferies’ model anticipates a potential rally exceeding 20% by the end of 2025, contingent on supportive Federal Reserve policies and the absence of adverse economic shocks. While near-term caution persists, Sherwin-Williams remains well-positioned to deliver long-term value for investors, backed by its robust fundamentals and resilience in the face of macroeconomic challenges, as per the analysts.

Sherwin-Williams (NYSE:SHW) Receives "Buy" Rating from Goldman Sachs Amidst Q3 Earnings Miss

  • Goldman Sachs reaffirms its "Buy" rating for Sherwin-Williams (NYSE:SHW), despite the stock's decline following its Q3 earnings report.
  • The company's Q3 earnings fell short of expectations, with total sales of $6.16 billion and profits of $806.2 million.
  • Sherwin-Williams' stock price experienced a decrease of 5.34%, trading between a low of $361.01 and a high of $389 on the day of the report.

On October 23, 2024, Goldman Sachs reiterated its "Buy" rating for Sherwin-Williams (NYSE:SHW), with the stock trading at $361.38. Sherwin-Williams is a leading paint and coatings manufacturer, known for its wide range of products catering to both professional and DIY markets. The company competes with other industry giants like PPG Industries and AkzoNobel.

Sherwin-Williams recently held its Q3 2024 earnings conference call, featuring key executives like CEO Heidi Petz and CFO Al Mistysyn. The call, attended by analysts from major financial institutions, provided insights into the company's performance and future outlook. Despite the "Buy" rating from Goldman Sachs, the stock experienced a decline following the earnings release.

The company's Q3 2024 earnings fell short of expectations, with total sales of $6.16 billion, missing the anticipated $6.22 billion. Profits rose by just over 5% to $806.2 million, but this was below the $873.54 million consensus estimate. CEO Heidi Petz cited "continued choppiness" and "softness" in demand, particularly in the DIY market, as reasons for the underperformance.

Sherwin-Williams reported earnings of $3.37 per share, which was below the Zacks Consensus Estimate of $3.56 per share. This represents a negative surprise of 5.34%. In contrast, the previous quarter saw a positive surprise, with earnings of $3.70 per share against an anticipated $3.51. Over the past four quarters, the company has exceeded consensus EPS estimates twice.

The stock, currently priced at $361.38, has seen a decrease of 5.34%, with a change of -$20.37. It has traded between a low of $361.01 and a high of $389 today. Over the past year, SHW has reached a high of $392.57 and a low of $232.06. The market capitalization stands at approximately $91.16 billion, with a trading volume of 4,282,861 shares.

Sherwin-Williams (NYSE:SHW) Receives "Buy" Rating from Goldman Sachs Amidst Q3 Earnings Miss

  • Goldman Sachs reaffirms its "Buy" rating for Sherwin-Williams (NYSE:SHW), despite the stock's decline following its Q3 earnings report.
  • The company's Q3 earnings fell short of expectations, with total sales of $6.16 billion and profits of $806.2 million.
  • Sherwin-Williams' stock price experienced a decrease of 5.34%, trading between a low of $361.01 and a high of $389 on the day of the report.

On October 23, 2024, Goldman Sachs reiterated its "Buy" rating for Sherwin-Williams (NYSE:SHW), with the stock trading at $361.38. Sherwin-Williams is a leading paint and coatings manufacturer, known for its wide range of products catering to both professional and DIY markets. The company competes with other industry giants like PPG Industries and AkzoNobel.

Sherwin-Williams recently held its Q3 2024 earnings conference call, featuring key executives like CEO Heidi Petz and CFO Al Mistysyn. The call, attended by analysts from major financial institutions, provided insights into the company's performance and future outlook. Despite the "Buy" rating from Goldman Sachs, the stock experienced a decline following the earnings release.

The company's Q3 2024 earnings fell short of expectations, with total sales of $6.16 billion, missing the anticipated $6.22 billion. Profits rose by just over 5% to $806.2 million, but this was below the $873.54 million consensus estimate. CEO Heidi Petz cited "continued choppiness" and "softness" in demand, particularly in the DIY market, as reasons for the underperformance.

Sherwin-Williams reported earnings of $3.37 per share, which was below the Zacks Consensus Estimate of $3.56 per share. This represents a negative surprise of 5.34%. In contrast, the previous quarter saw a positive surprise, with earnings of $3.70 per share against an anticipated $3.51. Over the past four quarters, the company has exceeded consensus EPS estimates twice.

The stock, currently priced at $361.38, has seen a decrease of 5.34%, with a change of -$20.37. It has traded between a low of $361.01 and a high of $389 today. Over the past year, SHW has reached a high of $392.57 and a low of $232.06. The market capitalization stands at approximately $91.16 billion, with a trading volume of 4,282,861 shares.