The Sherwin-Williams Company (SHW) on Q1 2022 Results - Earnings Call Transcript

Operator: Good morning. And thank you for joining The Sherwin-Williams Company’s review of the First Quarter 2021 Results and our outlook for the Second 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 U.S. 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 the session to questions. I will now turn the call over to Jim Jaye. Jim Jaye: Thank you, and good morning, everyone. Sherwin-Williams delivered first quarter results in line with our expectations in an environment characterized by strong demand, ongoing cost inflation and choppy raw material availability, which began improving meaningfully in the final weeks of the quarter. Sales in the quarter grew by a high single-digit percentage against a double-digit comparison a year ago, and we delivered sequential improvement and consolidated gross margin and segment margins in all of our businesses. Our margins remained under pressure on a year-over-year basis, a significant pricing actions previously announced in all businesses have not yet fully caught up to highly elevated raw material costs near-term. This remains an area of volatility. Our team is operating with confidence and momentum, as we begin to enter the painting season. Our strategy is clear and we remain focused on delivering solutions that help our customers succeed. Let me briefly summarize the quarterly numbers before turning to John Morikis, who will provide some additional commentary on the quarter and our outlook. Comparisons in my comments are to the prior year period unless stated otherwise. Starting with the topline, first quarter 2022 consolidated sales increased 7.4% to $5 billion. Pricing was in the low double-digit range. Volume was lower in the Consumer Brands Group and The Americas Group, primarily due to challenging prior year comparisons, along with anticipated raw material availability challenges, which are largely behind us now. Consolidated gross margin decreased to 41.1%, driven by lower sales volume, primarily due to raw material availability issues and cost inflation outpacing our price increases near-term. Our gross margin improved each month during the quarter and compared to last year. On a sequential basis, gross margin improved by 160 basis points, due primarily to additional pricing actions taken in the first quarter. SG&A expense decreased to 28.2% of sales. Our SG&A expense was 2.3% below fourth quarter 2021 and on a sequential basis was 200 basis points better. Consolidated profit before tax decreased 9.4% to $461.1 million. Sequentially, profit before tax improved by $152.2 million or 49.3%. The quarter included $70 million of acquisition-related depreciation and amortization expense, compared to $75.6 million a year ago. Diluted net income per share in the quarter was $1.41 per share versus $1.51 per share a year ago. Excluding acquisition-related depreciation and amortization expense and the Wattyl divestiture first quarter adjusted diluted net income per share was $1.61 per share versus $2.06 per share a year ago. On a sequential basis, adjusted diluted net income per share increased 20.1%. EBITDA in the quarter was $693 million or 13.9% of sales. Moving on to our operating segments, sales in The Americas Group increased 5.6% against a high single-digit comparison, as low double-digit pricing offset lower volume related to challenging comparisons into raw material availability, which improved significantly over the last few weeks of the quarter and has continued to improve as we enter the second quarter. DIY volume was impacted the most, as we prioritize serving the professional contractors, which make up the largest part of our business. Segment margin decreased to 16.8%, resulting primarily from lower sales volume and higher raw material costs, partially offset by selling price increases and good cost control. Segment margin improved 170 basis points sequentially. Sales in the Consumer Brands Group decreased 10.1%, due primarily to lower sales outside of North America and an impact of 6 percentage points related to the Wattyl divestiture. This was in comparison to an extremely strong quarter a year ago, where sales were up 25%. Adjusted segment margin decreased to 12.1% of sales, resulting primarily from lower sales volume and higher raw material costs, and supply chain inefficiencies, partially offset by selling price increases. Segment margin improved 580 basis points sequentially. Sales in the Performance Coatings Group increased 20.4%, against a double-digit comparison and were driven by volume and price increases. Adjusted segment margin decreased to 11.8% of sales, as operating leverage from the higher volume, selling price increases and good cost control were more than offset by higher raw material costs, where inflation was the highest among the company’s three operating segments. Adjusted segment margin improved 290 basis points sequentially. Let me now turn the call over to John for some additional commentary on the first quarter along with our outlook for the second quarter and the full year 2022. John? John Morikis: Thank you, Jim, and good morning to everyone listening. Before getting into some color on our three segments, I’d like to frame today’s call with some themes we are seeing across the business. First, demand remains very strong across most of the business. Our teams are highly engaged and focused on growing volume through new accounts and share of wallet, as well as reactivating customers that may have shopped elsewhere to meet the needs of a specific project over the past year due to product availability challenges. Second, raw material availability improved meaningfully late in the quarter and this has continued into the second quarter. We do not expect lack of raw materials to have a material impact on sales going forward. To be clear, the supply chain has not completely recovered, as the bottleneck has now largely moved from suppliers’ production to their transportation and logistics. In the near-term, we are speeding this recovery by employing our own fleet and tank wagons to supplement suppliers’ delivery capabilities. Our ability in this area is unique among our competitors. We are also focusing on SKU prioritization and formulations to make the most of the raw materials that are available to us. Additionally, the Specialty Polymers acquisition is meaningfully contributing to our resin needs. Third, inventory in our stores and distribution centers is in a markedly better place than it was at the end of December. The 50 million gallons of incremental architectural capacity we brought on in the fourth quarter is up and running. As the supply of raw materials improves, we are quickly converting those materials to paint. In fact, we made more architectural paint gallons in March than in any previous month in our company’s history. We expect to run this additional capacity at a high rate to keep up with demand through the painting season and then begin building inventory in our fourth quarter as we typically would. And looking to the future, we announced a $300 million investment to begin expanding production and distribution at our Statesville, North Carolina architectural facility that serves both TAG and CBG, which will be completed in 2024. Finally, inflation remains significant and is trending toward the high end of the guidance we previously provided. In addition to raw materials, we have seen increases in other elements of the cost basket including freight, energy and labor. As we have said in the past, our continuous improvement efforts are focused on offsetting these increased costs. Additionally, we have been aggressive with pricing actions in all of our businesses to offset these costs and we will continue to do so as necessary. As far as our first quarter, I will keep my comments brief in order to get to our outlook. The Americans Group, sales growth in the first quarter was led by Protective and Marine and Property Management, both of which were up by a double-digit percentage. New residential, residential repaint and commercial were up by a mid single-digit percentage. DIY was down double digits, as we faced a strong double-digit comparison and prioritize sales to professional contractors. We have also begun to see margin recovery in the business as segment margin expanded sequentially. From a product perspective, exterior paint sales performed better than interior sales, with interior being the larger part of the mix. We realized a low double-digit increase in price in the first quarter, with volume remaining under pressure. The 12% price increase we announced February 1st is going in as planned. We opened for net new stores in the first quarter and still plan 80 to 100 for the year. We also continued our growth investments and sales reps, management trainees, innovative new products, ecommerce and productivity enhancing services. Moving on to our Consumer Brands Group. While this business faced a very challenging comparison, we are encouraged by our sales in North America, which were nearly flat as we continue to focus on supporting key strategic retail partners and growing our pros who paint initiative. Sales were softer in Europe and China, as we faced double-digit comparisons and COVID-related lockdowns. Note that we have now anniversary the Wattyl divestiture, which was a drag on Group sales of about 6 percentage points in the quarter. Pricing was positive in the quarter and in the high single-digit range. Segment margin expanded significantly on a sequential basis benefiting from increased volume, leverage on SG&A and incremental pricing. Last let me comment on first quarter trends in Performance Coatings Group. Group sales increased by 20.4% in the quarter, including high single-digit volume growth against a double-digit comparison. Price realization was in the low teens range, and all regions and all divisions generated growth. As in the other groups, we saw meaningful sequential margin improvement during the quarter. Regionally, sales in the quarter grew fastest in North America, followed by Latin America, Asia and Europe. Every division in the Group grew, with nearly all by double digits, driven by robust underlying demand, new customer wins, share of wallet gains and pricing. Packaging was strongest, followed by coil, general industrial, auto refinish and industrial wood, respectively. Before moving to our outlets, let me speak to capital allocation in the quarter. We returned approximately $558 million to our shareholders in the quarter in the form of dividends and share buybacks. We invested $407 million to purchase 1.45 million shares at an average price of $280.77. We distributed $150.9 million in dividends. We also invested $106.3 million in our business through capital expenditures, including $77 million in core CapEx and $29 million for our building our futures project. Additionally, the acquisition of Sika European Industrial Coatings business closed on April 1. We ended the quarter with a net debt-to-EBIT ratio of 3.3 times, as we increased short-term borrowing to fund our share repurchases and the Sika acquisition. We expect to be closer to the high end of our 2 times to 2.5 times range by the end of the year. Turning to our outlook, as I referenced earlier, we continue to see very strong demand in North America, Pro architectural end markets, though we are facing a comparison to a strong double-digit growth quarter that was driven by very robust post-pandemic recovery. Comparisons will ease in the back half of the year. Rising mortgage rates have not made an appreciable dent in the demand for our new residential customers to this point. Should the residential demand slow, we remain extremely well-positioned in multiple architectural segments, including residential repaint and property management, which have proven to be more defensive in nature. We expect industrial demand will remain strong as the year progresses based on the outlook our customers have shared with us. Comparisons will be challenging over the remainder of the year. Demand remains strongest in North America, our largest region. European demand also remains strong, although we continue to closely monitor for potential impacts from the war in Ukraine. For the record, our sales in Russia and Belarus are well below 1% of the total company sales and we are suspending operations in these regions. In Asia and in China particular, demand has been dampened near-term by the latest COVID-19 wave. On the architectural and industrial sides, we will continue to leverage our strengths in innovation, value-added services and differentiated distribution, as we expect to grow at a rate that outpaces the market. From a supply chain perspective, we believe we are through the most challenging aspects. As I described in my earlier comments, we expect this to continue improving and to have a minimal impact on sales going forward. On the cost side of the equation, we are maintaining our low double-digit to mid-teens raw material inflation guidance. Though, we are trending toward the high end of the range, driven primarily by Performance Coatings Group. There is considerable short-term volatility in the market and our visibility beyond the quarter or two is limited. We do expect the level of year-over-year inflation to remain elevated, but to moderate in the back half of the year. Our pricing actions remain on track and we are prepared for additional increases if necessary. For the second quarter of 2022, we anticipate our consolidated net sales will increase by a low double-digit to mid-teens percentage compared to the second quarter of 2021, inclusive of a low double-digit price increase. We expect The Americas Group to be up by a high single-digit to low double-digit percentage. We expect Consumer Brands to be up by the high-teens to a low 20 percentage. And we expect Performance Coatings to be up by a low double-digit to mid-teens percentage. Our full year guidance is heavily second half weighted due to stronger volume, the impact of pricing actions and weaker second half 2021 comparisons. I will remind you we began 2021 with great momentum, including first half sales growth of 14.7% and adjusted EPS growth of 26.6%, before the natural disasters, supply chain and COVID issues derail the second half of the year. For the full year 2022, our guidance remains unchanged. We expect consolidated net sales to increase by a high single-digit to low double-digit percentage. We expect The Americas group to be up a mid-to-high single-digit percentage, with North American paint stores at or above the high end of the range. We expect Consumer Brands Group to be up a low-to-mid single-digit percentage and Performance Coatings Group to be up by a high single to low double-digit percentage. We expect diluted net income per share for 2022 to be in the range of $8.40 per share to $8.80 per share, compared to $6.98 per share, earn in 2021. Full year 2022 earnings per share guidance includes acquisition-related amortization expense of approximately $0.85 per share. On an adjusted basis, we expect full year 2022 earnings per share $9.25 and $9.65, an increase of 16% at the midpoint over the $8.15 we delivered in 2021. The additional data points we provided last quarter on full year currency exchange, tax rate, CapEx, interest expense, depreciation and amortization are unchanged. As we enter the heart of the painting season, we remain confident our strategy, our capabilities, and the differentiated product and service solutions we bring to customers. The 61,000 employees of Sherwin-Williams are focused on the tasks at hand and there is no better team in the industry. Our business remains extremely well-positioned and we are emerging as an even stronger Sherwin-Williams following the challenges we faced the last two years. I am excited by the momentum we are gaining as we progress towards what we expect will be a very strong second half of the year. In addition to today’s call, I will remind you, we will provide additional commentary on the market and our business at our upcoming Financial Community Presentation event scheduled for Wednesday, June 8th in New York City. Details are available on our website and we are very much looking forward to seeing many of you in person. And that concludes our prepared remarks. We will be happy to take your questions at this time. Operator: Certainly. Your first question is coming from Vincent Andrews from Morgan Stanley. Your line is live. Vincent Andrews: Thank you, and good morning, everyone. I am wondering if you could just talk about your volume possibilities in TAG in the second quarter. If I sort of back out the price we think you are going to get in the second quarter to sort of imply some volume. I am just wondering how much better you might be able to do versus that and if you are concerned that maybe just I know you had big volume production in March. But is there any limit at all for the amount of volume you could flow through the stores in the second quarter? John Morikis: Yeah. Vincent, maybe the way I will go out this is, just to take a quick run through the different segments and give you a little bit of color on the demand, because I think that speaks to what you are asking here. So let me start with raspberry paint and tell you that our customers are experiencing really strong backlogs. There’s a positive mix shift in quality that’s also taking place and we believe that plays really well to our advantage. So when you talk about volume, our ability to grow our volume faster than market also includes the ability to drive greater productivity through for our contractors is this quality that we are providing them helps to provide the finished product that a more experienced painter applicator might be able to apply and so we are helping them do that with through product. If you look at this area, you would clearly see home appreciation driving demand. LIRA their forecasting for the growth in 2022 is in double digits. If you look at the NHAB -- NAHB Remodeling Index is strong well above 50. And existing home sales have slowed year-over-year against a very strong comp in lack of inventory, but overall it’s a very strong market for us. So we expect to continue to see a good strong demand market in residential repaint our contractors are telling us. I mentioned many of them are looking through the end of the year with a pretty solid backlog of projects and we are going to grow with those customers. But this is an area that we absolutely expect to continue to grow our market share pretty aggressive rate. Property Maintenance is -- really underlying demand is solid here as well. There’s been delayed maintenance that’s now being addressed and we see improved areas and apartment turns along with the return to travel, office, even school that’s driving demand. And I’d say, in this area as well there’s an increased awareness of the need to keep these assets fresh, current and clean, and as you know, paint is inexpensive, yet impactful solution in this area. Commercial, I would say, the underlying demand here is also solid. Projects are resuming albeit at varying paces, but the starts are positive. Customers are reporting labor constraints and material shortages on these projects are acting as governors of growth. So any aspect of this project that could be anything from drywall to roofing project -- products, anything could have an impact here that’s could be significant. Dodge Momentum Index here is strong, as is the Architectural Building Index, which has been positive for straight months, and as you know, that tracks the current building by architects, which generally leads to the commercial construction spending nine months to 12 months out. And the other area, obviously, that we are really focused on is new residential, we got a great position here and growing by the way, starts and permits remain strong year-over-year with multifamily stronger than single, but both really terrific markets for us. Completions are softer due to material availability here, in some cases, labor as well. We have not seen a meaningful slowdown, as I mentioned earlier from rising mortgage rates, which are still low in comparison to other periods. In this area, we have gotten a lot of questions about throughout the quarter and I thought I’d just highlight one area, this article by USA today that I think captures kind of the sentiment that we have in new residential. They talked about the housing unit shortfall ranging between 5.5 million and 6.8 million, despite an annual average of 1.5 million new housing units completed and a 1.7 million spike in 2020 alone, a new construction would need to accelerate to a pace that’s well above this current trend to more than 2 million housing units per year to close this gap. Even if building were to continue at the current level, the most rapid pace in more than a decade, it still take more than 20 years to close the 5.5 million unit gap. So as I mentioned, we have got a strong position here. We are determined to get stronger here. And I will tell you that, regardless of what happens in these professional areas, way that we have been driving this company for years now with our strategy development and strategy deployment is to be in position to capitalize on it whichever way it tilts. So if any one of these areas should for some reason slow down, we have worked really hard to position ourselves to be able to capitalize on whichever way the market might shift to and we believe that we would be able to capitalize on it. I am going to touch on one more area then I am going to ask Al to talk on the volume a little bit further as DIY. We did talk about the fact that DIY behaved as we expected. As demand continued to return to more normal level and this was against, as I mentioned earlier, difficult comp. But we also prioritized our professional contractors and our key strategic customers in our Consumer Brands business that impacted this DIY business. Al Mistysyn: Yeah. Vincent, this is Al Mistysyn. As I -- just as a level set on our January call, we talked about our expectation for the first half architectural volume, which includes Consumer and TAG to be flat to down low-single digits primarily because of the difficult comps that John talked about. In our second quarter with our TAG sales projected be up high low, high single to low-double digits with price up low-double digits and volume flat to down slightly. That’s a sequential improvement for the first quarter. So we talked about the first quarter being down mid-single, flat to down slightly in the second quarter. That leads you to the momentum on an easier comp in the second half. We talked about the full year TAG sales of mid-to-high single digits with North America paint stores at or above the high end of that range. When you look at price low-double digit in our first half, as you analyze the price increases we took in in the second half of last year, our price in the second half will trend for the year to be at mid-to-high which gets you a low-to-mid single-digit volume growth in TAG and North America paint stores and I fully expect that to be the case. Vincent Andrews: Thanks so much. John Morikis: Thank you, Vincent. Operator: Thank you. Your next question is coming from Jeff Zekauskas from JPMorgan. Your line is live. Jeff Zekauskas: Thanks very much. Can you comment on the effects of raw material shortages on volumes in the first quarter? And can you talk about your volumes in the first quarter in residential repaint and new residential, commercial, what was the business like excluding the volume contraction in DIY? Al Mistysyn: Yeah. Jeff, on raw material availability, what I would say is, we talked about on our year end call that we thought it might be a low single-digit to mid headwind. The way the quarter rolled out with availability, we saw some choppiness in January, improved in February. As John talked about, it was significantly better into March and into -- and it continues to improve in April. And in the data points that I have to show that, as John talked about, March was a single largest architectural production volume on -- in the history of the company. We significantly improved architectural gallons from December year end through the end of March. It’s not our historic levels, but it is a significant improvement 20 plus million gallon increase. So, I think, to pinpoint exactly how much availability had on the quarter, it’s really tough, because I look at how much of that would have been in sales versus how much we could have put in inventory. The fact is, the availability behind us, we have a lot of confidence to fill our 50 million gallons of additional capacity, along with the help of SPI. And the other data point I would highlight is, our expectation for architectural inventory through our seasonally highest second quarter and third quarter sales quarters to be flattish from the first quarter. As you know, Jeff, historically, our inventory would decline through the summer quarters, because you can’t keep up with the volume. Because of the capacity we put in, we are going to be able to keep up with the sales volumes and increased buying inventory in our fourth quarter similar -- getting back similar to where we were back in 2019 and significantly higher than the last two years. John Morikis: Yeah. The only thing I would add to those great responses. I think the trend of manufacturing will continue to your point all the way through till probably this time next year, we will run our assets hard to build that inventory back up. And maybe clarifying point that I think is important is that to your question about volume on each of those segments, Jeff, I don’t need to break them all down, because they were all very similar. They all improved as the quarter improved, quarter went on. Jeff Zekauskas: Were they higher for the quarter or lower? John Morikis: Year-over-year they were lower? Al Mistysyn: Yeah. Jeff, they would be lower, primarily because of the more difficult comps that we had. Whereas repaint was up -- raspberry paint, new res, DIY roll up strong double digits and new res and commercial were up as well. So tougher comp in our first quarter. Jeff Zekauskas: Okay. And for my second question, the -- are you done with price increases in The Americas Group, you have commented in your slides that you have more pricing actions to go in Consumer Brands and Performance Coatings. But I didn’t see that in America. So are we done in Americas for this year? Al Mistysyn: Yeah. Jeff, I wouldn’t say we are done. I would say, when we look at the visibility and the volatility we have in the market around, not just raw materials, but other input costs. That visibility is out one quarter at best. I think what you will see us do is like we have in the past. We will monitor those input costs very closely and if we see a meaningful or if we see a meaningful change in them, we are prepared and discipline to go out with additional price. Similar to what we did last year, we went out August 1st 8% and we went out in September with a surcharge. So we have to monitor these situations closely and really react to what we anticipate. Jeff Zekauskas: Great. Thank you so much. John Morikis: Thanks, Jeff. Operator: Thank you. Your next question is coming from Josh Spector from UBS. Your line is live. Josh Spector: Yeah. Hi. Thanks for taking my question. So just on the consumer side, I mean, kind of goes to some of your prior points on The Americas Group. Just wondering how much of the 20% growth would you say as volume refill versus pricing moving up from the high single-digit level? John Morikis: The -- if I look at the -- you say the 20% growth in our first quarter. Josh, are you talking about our second… Josh Spector: Sorry. In your second quarter guide? John Morikis: Sorry. Thank you. When you look at high-teens, low 20%, expect price to be up a similar amount. As TAG, we have significantly easier comps, which was down strong double-digit. I think when you look at our inventory build. We had an inventory built in the first quarter through our strategic partners. As you would expect, we were in a similar situation that we talked about as the third quarter and fourth quarter went on, we drove our inventories down across the chain, both the TAG, Consumer and our retail partner. So we did have to build some inventory at store level with these partners. But really the -- we did have a weak comp, we expect North America to be strong, we do expect with Asia and Europe to be softer in our second quarter. That’s about 15% of our sales and pretty strong comps outside the U.S. and Europe and Asia. So, I don’t have an exact number to say, how much was building versus sell-through, but rest assured, we had to build inventory in our first quarter in our retail partners. Josh Spector: Thanks. And I guess just as a follow up, are you seeing any change in the Consumer channel or -- and the DIY channel, either your own stores or in your Consumer Brands group? I guess as pricing goes up, is there any trade down or any things generally pretty stable? John Morikis: No. I’d say they are pretty stable. I’d say in -- as it relates to the Consumer side of our stores and in our Consumer Brands customers. I’d say in our Professional side, as I mentioned earlier, we are seeing more of a positive mix shift moving into higher quality rather than shift down. Josh Spector: Thank you. John Morikis: Again, that’s driven mainly off of labor and the design of the painting contractor has to be as productive as they can, so they can attack the backlog that they are facing. Thank you, Josh. Operator: Thank you. Your next question is coming from Chris Parkinson from Mizuho. Your line is live. Chris Parkinson: Great. Thank you so much. So you had a little on the raw material shortages? Can you hit on your own, as well as probably the industry’s efforts to further backward integrate into certain resins and also some additives? Just where do we stand with that and when should the investment community see the effects from those efforts? Thank you. John Morikis: Well, importantly, our customers are starting to see the effects as we purchased this SPI with the idea of really trying to leverage that asset, Chris, I think, it’s doing that and it’s only going to get better for us. I don’t think you should expect us to continue further upstream. We believe -- we have always had a resin strategy and we have always manufactured resin. SPI was a top producer for us, terrific people, terrific assets and an opportunity to get in there and get the most out of that that set of assets. It also, as you mentioned, as we mentioned, when we announced this, it helped us to deleverage, if you will, a little bit of the dependence on the Gulf Coast, these manufacturing facilities are on Each Coast and to get a little bit away from some of the hurricane risk that, while they are on the coast or inland and terrific assets. We are already starting to see more productivity out of these assets. We expect that to continue. There will be some investments in there, but very reasonable with great return. We don’t expect us to get into the additives, TiO2 business, that’s not where we belong. Chris Parkinson: Got it. There’s also been a lot of chatter just in the investment community, at least in the past quarter to just regarding market share shifts, potential market share shifts, in some part due to finish product shortages. Now that you have the opportunity to speak to all of us, what’s your public response to those debates and what confidence level can you convey to us regarding your ability to maintain or likely build market share, once everything normalizes in the supply chain? Thank you so much. John Morikis: Yeah. Chris, I appreciate that question, and I’d tell you that, our confidence level is very high. We can always speak to our strategy. And I will tell you that we are blessed with a control distribution model that serves us well. And we leverage this model, and that includes a strong and very consistent brand strategy. We think that branding strategy and the consistency of it is equally important. We have an innovation program designed to develop segments specific product. So because we have a control model, we are able to talk to each of these segments to understand what are the needs of these customers, what are the challenges and we develop probably products that are specific for these segments. And we do the same with our services, so that we have a very good understanding of what the needs are of these painting contractors and we build the services to help them make more money. And finally, the reason I have probably the most confidence is our people. I believe we have the best people in the industry and I am not apologetic about making that claim. We hire around 1,400 to 1,500 college graduates a year to enter our Management Trainee Program and we recruit outstanding talent. We train and develop this talent and we retain this talent. These are the people that serve our customers. And for nearly 40 years, we have been investing in this program. This training program is 40 years old. We now have thousands of graduates from our Management Training Program throughout the company. In just our TAG business, as an example, four of our five division Presidents were management trainees, our Group President was a trainee and throughout the company, we have over 26 Vice Presidents that were management trainees. And by the way, one CEO that was a training. We think this is important. Our customers, they are buying more than a gallon of paint, that -- we tell our people constantly that, companies don’t compete, people do. 70% of our field leaders are graduates of our Management Training Program and they provide the leadership and direction to our tenured organization, they know what to do, they know how to win. And I say tenure, because over 7,000 of our employees are -- have greater than 20 years service. That’s nearly 15% of our workforce has 20 years or more of paint experience. And these leaders created an environment where people win and they want to stay. One half of our rep force has over 10 years of service. Turnover of our customer facing reps and managers is still in single digits. In this environment still in single digits, we are hanging out of the most important assets we have and that’s our people. Our people wake up every day, they focus on two things, paint and making painting contractor successful. So this specialty store format, it works for painting contractors. We have always talked about avoiding complacency in our company. In fact, we often say that complacency kills. We are working to get better every day. We were working to make our painting contractors better every day. But I will say this, I do believe this will come down to our people versus others. We have a 40-year head start, a lot of drive, a lot of determination. We are not going to win by a little bit. I am looking forward to competing against any model. Chris Parkinson: Great color. Thank you so much. John Morikis: Thanks, Chris. Operator: Thank you. Your next question is coming from Ghansham Panjabi from Baird. Your line is live. Ghansham Panjabi: Thank you. Good morning, everybody. I guess just going back to your earnings guidance through iteration for 2022. The macroeconomic backdrop seems a bit less certain, especially in Europe and China, along with any potential supply disruptions in these regions as well. Now understanding that you have a wide earnings range still for the year, what would you call it as sort of incremental positives relative to initial view that are offsets to some of the risks on the global macro? Is it as simple as just better raw material access visibility or what else would you have to think about? John Morikis: Well, I’d say first, we just talked a lot about people. I’d say that’s a third advantage. But I’d also say that if you look at the assets, we have talked about that we have deployed, the responsiveness that we have. And I will say this, our Chief Procurement Officer, Colin Davie and his team are working really well with our customers and I have learned to appreciate the demonstration of rewarding suppliers who have stepped up to serve us and the suppliers have been creative in responding to our needs. The assurance of supply to your point continues to be an important element in this market and once you have that supply, I think, we demonstrated in the month of March, we had a record month in the company’s history of producing product. And so, what I’d say is that, it’s not one thing. It’s the entire ecosystem. It’s everything we are doing. Everything that we bring and it’s all focused and starts with one thing, the customer. So we are looking through that lens we are working back and this large 156-year-old company is learning to be nimble and quick and respond. And so I’d say that, if I am looking at it from the outside in, I am looking at a lot of assets that are really positioned well to be able to respond to a high demand market. Al Mistysyn: Ghansham, I would just add to that. You look at our sequential gross margin and operating segment improvement -- sequential improvement across each of the operating segments and all the hard work that those teams have done. Ad I will highlight one in particular, Performance Coatings Group that took the really the brunt of the raw material increases in the second half have been out with price on multiple occasions. You look at our first quarter operating -- adjusted operating margin about flat year-over-year. And if you recall, the increase -- significant increases we took for raw materials for that segment were primarily in the second half. So that team has done just an absolutely terrific job getting price, holding price and its showing and we are going to see that continued improvement in our gross margin in the second quarter. We expect to see sequential improvement in our gross margin and across each of the operating segments, albeit Consumer from a historic low operating margin and adjusted operating margin in the fourth quarter, but the pricing actions, the volume and all the continuous improvement efforts across each of the segments that are helping to drive our bottomline faster than our topline. So that’s what gives me confidence that we are going to continue to see improvements as the year goes on. Ghansham Panjabi: Okay. Thanks for that. And then if we have just switched to Performance Coatings, several businesses in their packaging, coil, et cetera, have had a very, very good run volumetrically. There’s lots of evidence of kind of mean reversion of consumer habits that have occurred post-COVID as mobility sort of normalizes. So as you kind of think about these various individual businesses within PCG, how do you expect the volume trend line to unfold over the next few quarters? John Morikis: Well, we are really excited to your point. We have got a lot of momentum in these businesses and there’s no expectation for less if that’s the question. We sit in this room, this boardroom and we talk with our teams regularly about the competence that we have. And maybe I could walk through quickly, if you would like each of these segments, just to give you a little bit of color, because there is a lot of strength, but boy, there’s so much opportunity. If you look at our packaging, we had a strong double-digit growth in the quarter. In fact, each of the last three quarters we have had record quarters in this business, packaging sales, with sales of around 30% per quarter for the last three. So if you look at this business, the demand is very robust and food and beverage, our non-BPA coatings continues to gain traction. Both we and our customers are investing in capacity expansions in anticipation of a strong demand year here in 2022 and beyond. So we are thrilled about that business. The differentiation that we have in the technology and the people we have, it is just phenomenal. This is a nugget that came obviously with the Valspar acquisition as this coil. We had a double-digit growth quarter in coil. That’s the fourth straight quarter we have had sales of double-digit growth here and double-digit in every region, led here by extrusion and metal buildings. So we are excited about this business going forward. Our general industrial, again double-digit growth in the first quarter. That’s the fifth straight quarter with double-digit growth in GI. Every region was positive led by North America and our LatAm business, transportation and general finishing were strongest here. Our auto refinish had double-digit growth. Miles driven here are below, but nearing pre-pandemic levels and continue to leveraging our technology as a key here. We brought in some wonderful technology from Valspar that works terrifically with our Sherwin tech technology and we are growing share here pretty aggressively. And in industrial wood, we had a high single-digit quarter. We have got very good momentum here, furniture, kitchen cabinetry, cabinetry and flooring, which obviously correlate to similar positive trends in new res construction. So we saw increases in all end markets, most by double digits and clearly really pleased with packaging and coil, but all of them were strong and by region, North America, our largest region grew the fastest and LatAm, Asia and Europe right behind. So expectations of this team remain really strong. We got a terrific leader here as well. Karl Jorgenrud came to us from Valspar. Got a lot of division presidents beneath Karl that are really experienced as well. We talk a lot about our TAG organization and the retention of people and the importance of that in TAG. But the same stands true in PCG. Our average division presidents average 29 years between Sherwin-Williams and Valspar. And again, when you look back, we talked openly about this greatest infusion of talent, when Valspar and Sherwin came together and we have been terrific in the retention of those people. Our turnover still and this is years after the integration is below 7%. And so, on the architectural side, I think if you look at the legacy Sherwin and the talent we had on the architectural side, we are pretty -- we like to think we are pretty strong, always could get better. They brought, obviously, some talent came in from the architectural side of Valspar. In fact, our new Chief Operating Officer came through the architectural side of Valspar. But when I look at the PCG side and the benefits we have had on the talent that’s come in from Valspar and our ability to retain it, yeah, it gives us terrific confidence going forward. So fundamentals, we have got great assets. We have got great technology. We have got great people. And we have great customers and we are going to leverage that for everything we get. Ghansham Panjabi: Thank you. John Morikis: Thanks, Ghansham. Operator: Thank you. Your next question is coming from Greg Melich from Evercore ISI. Your line is live. Greg Melich: Hi. Thanks. I want to follow-up a little more detail on the gross margin progression in the quarter. I think you mentioned that gross margins were down year-over-year, more due to volume than the gross price. Could you give us the number on that and do you think that continues that mix of gross margin pressure in the second quarter? Al Mistysyn: Yeah. Greg, it -- the volume, as you know, and what we have always talked about is the single biggest driver of not just gross margin but operating margin and that clearly is a higher impact. If you look at year-over-year in our -- if you look at price cost in our first quarter, we are still chasing a little bit. I think we get on top of that as we get towards the end of the second quarter. So it will be less of a drag. And also in our second quarter, you see a seasonal increase in our architectural volume as you normally would. That’s going to help drive our gross margin, it is going to help drive our operating margin, and Greg, it’s still tough comps against TAGs, but you look at the volume down mid-single digits, it’s a significant drag in our first quarter. And to be down flat to down slightly in our second quarter is going to be a positive mix shift as well in our second quarter that’s going to help grow the margin. Greg Melich: Got it. And when we look at the back half, if price is on top of raws by the end of the second quarter, for the back half, do we need another round of pricing to stay on top of the costs, given what we have seen year-to-date with, I guess, raws at the higher end of the range? Al Mistysyn: Yeah. Greg, I think, what you -- what we are looking at is more on the industrial side right now. I think when we talk about the basket moving to the high end of the range. It’s more on industrial. As you know, industrial price increases aren’t as uniform. So there may be -- I talked about on our year end call, some in the first quarter, some that roll into the second quarter. I think the timing of those are pretty much the same. It’s just the -- that the amount or the percent increase that may have had to get adjusted. But like we talked about earlier, I think, our visibility is one quarter out at best, a lot of volatility and we will continue to monitor that, based on the last year and a half, I am not going to say, we don’t need more, we are just going to have to monitor it and go out and react accordingly. John Morikis: Yeah. What we will say is that if we need to, we will. It’s not a hesitation. Greg Melich: And maybe, John, just a follow-up on that, given the volume shortfalls, especially in the back half last year, are you a little more resident to hike prices again within a quarter. I am just thinking in the past, I think, you have waited about four months, now as you are trying to rebuild that volume and share. Do you think, obviously, you will get the pricing, but is there a tendency to want to wait an extra month or two just to be sure? John Morikis: I think we have, you are right, Greg. Good for you, because I know you know our company well, we have done that. And I think what’s different now is that we are a little bit further into the volatility portion of this cycle and we have been communicating to our customers with greater clarity about the volatility. So I don’t know that we need to wait as we have had in the past, because we have been communicating to the customers, that our intent is to try to keep the price increase to a minimum. But with that, we are not building a buffer to be able to absorb the volatility and if there is more volatility, then we will need to be out quicker with additional price. So, I think, we would be moving quicker, and to your point, it’s nothing we would prefer to do or enjoy doing. We have yet to get a thank you note from any of our customers for it. But if the need be, we are going to do it, we will do it quickly. Greg Melich: Great. Thanks and good luck. John Morikis: Yeah. You bet. Operator: Thank you. Your next question is coming from John McNulty from BMO. Your line is live. John McNulty: Yeah. Thanks for taking my questions. You had mentioned early in the call that you were using your own fleet and the flexibility that you have with that to help your customers from a logistics perspective. Can you help us to understand, one, is that something you actually incrementally charge or is it just kind of part of the service that your customers are appreciative of? And I guess, on top of that, how should we think about -- if it is just more of a, hey, it’s part of our service, then how should we think about the cost of that and how that might decline once the -- all the big logistic issues kind of get put in the rearview mirror for us all? John Morikis: Yeah. John, let me first go back to your question and the comment that we made earlier. What we were speaking to specifically there was suppliers not customers. And we do work with our suppliers, mainly to bridge gaps to ensure that we have the product when we need it, where we need it. It’s not our intent to do their jobs, but we are in this together with them, trying to work with them, and as you would expect, when that happens, there’s a discussion about what it cost that goes along with the fact that we are going to do that. So right now and you know our company, our focus is on taking care of the customer and the fact that we have got our fleet and it is a point of differentiation. We do leverage those and there are times when we are less efficient doing that. For example, one of our largest customers on the Consumer Brand side was very adamant about a South to North recovery approach that was a little less efficient than we would have liked to have seen, but important to our customers. And so we took that undertaking and served our customers in a way that allowed us to respond to their needs, not what -- not which was most or least expensive to us and that’s our DNA. And so, if it’s to use our fleet of trucks to help in the pinch to be able to get raw materials to a plant, or in some cases, right now, we are producing where we can get the raw materials and we are shipping it in some cases across the country to ensure that we have supply where we need it and if we were less efficient than what we would like and we have this terrific footprint. We want to optimize our supply chain to its fullest. But when it comes down to it, we are going to choose serving our customers. And over time, that the efficiency will work its way back in, we are not just waiting for that to happen. You should expect that, as a leadership team, we are very focused on it. Our teams understand that, but we also understand that servicing our customers is the highest priority we have. Al Mistysyn: Yeah. John… John McNulty: Got it. Thanks very much. Yeah. Go ahead. Al Mistysyn: The only anything I would add to that is, we did call out that supply chain comment that John talked about in our Consumer Brand Group being a little bit of a drag in our first quarter. But clearly -- and that’s -- to John’s point, that’s an investment we are willing to make in servicing our customers better. That drag, if you look at the operating margins and what they were down, volume is still number one in consumer is driving that operating margin lower year-over-year, and then, let -- probably a third is the supply chain efficiencies, just to make that clear. John McNulty: Got it. Thanks. Thanks for the color. Appreciate it. John Morikis: Thanks, John. Operator: Thank you. Your next question is coming from Steve Byrne from Bank of America. Your line is live. Steve Byrne: Yeah. Thank you. The inventory build at the end of the quarter is noteworthy. Is that largely driven by the raw material costs or do you really have much more volume than previously you might have been low going into the quarter, but you commented that March was a big volume production month for you. So is that -- if that’s volume driven, is that a reflection of what you are seeing your Pro contractors have as backlog and is that what is giving you this confidence in such a strong second half? John Morikis: Well, Steve, let me be very clear. We have incredible confidence in the second half, hard stop. We are growing inventory sequentially each month of the first quarter, because raw materials became more available. We added 50 million gallons of capacity. It’s online. It’s supporting the demand, and we are building inventory. We don’t have the inventory that we normally would have had coming out of the first quarter, but given the additional capacity that we have, we are able to serve our customers and we are going to utilize that additional capacity in everything we have between now and likely this time next year to run full speed, all out, building inventory to be able to continue to serve our customers. And if we have to put a little more in working capital to be able to serve our customers, we are going to do that. Steve Byrne: And perhaps, relative to historical splits between first half and second half sales, how much stronger do you think second half this year could be? John Morikis: It’s going to be a much stronger part of our success this year, partially because of the comparisons that we have, for sure. And second, as I -- we have just talked, the ability to make a record year -- a record month of production in March, says that, we have product, we have raw materials. And so, the demand is strong. We have raw materials. We have capacity. We are going to have a good time in the back half. Steve Byrne: Maybe just one quick one, what fraction of your consumer sales are Pros that pain and how do you get that data? Is that from your partner? John Morikis: Yeah. We are not going to comment about our customers’ mix of business. I will tell you that it’s overall a relatively small, but is a very important and growing area. We have been talking for a number of quarters about the investments that we are making here, the commitments that we are making here. In fact, even the fact that we just came through a pretty challenging time and we were prioritizing that business with raw materials. I think it should speak volumes. We love this controlled distribution model through our own stores, but we are very excited about this Pro who paints model. And we have, through our own stores had, if you look at it, marginal success, because there are customers that prefer a home centre channel. They want to be able to get in and they want to be able to buy a full array of products that are only available at a home centre. In the marketplace, there’s been a limited amount of competition in this space for too long and we believe, along with our strategic partners that there’s a terrific opportunity and we are determined to help our strategic partners win in this space. Steve Byrne: Thank you. John Morikis: You bet. Operator: Thank you. Your next question is coming from P.J. Juvekar from Citi. Your line is live. P.J. Juvekar: Yes. Hi, John. You talked about raw material shortages and supply chain issues for a while. Do you think adding 80 new stores is going to add to that complexity or do you think you have this new capacity and excess inventory that you can load in these new stores? And also, what’s the cadence of new stores? I think you opened, you said, only four new stores in the first quarter, so what’s the cadence of that? John Morikis: Well, let me finish -- start with your finishing portion. We are going to be between 80 and 100 stores this year. And the answer as to why perhaps in a market like this to add stores is, we believe in the model. And we play a long game here and we didn’t predict that the world was coming to an end because we couldn’t get the raw materials. We knew we would and we continue to invest in every aspect of our business. Including, if you look at it in our manufacturing, we invested in labor to have people in our facilities, so that when raw materials became available, we could convert them. We did that and I think Mark demonstrated that. So now you follow the pipeline a little bit further, and you say, okay, now we are producing products. I am not going to be sitting here saying, oh, I wish we would have had the courage to invest in stores when things got a little bit tight. Maybe it comes with the 37 years of scar tissue that I have in the 30-plus years that all have and our other employee. We have seen this movie before. We know how it works. And we have got confidence. And when you have confidence, you look at adversity in the eye and you say we are going to run right at this. And during these tough times, we knew that others would do exactly what they do, close stores, close territories, get in their bunker and we are going after. We are bunker hunting right now and we are going to continue to do that. P.J. Juvekar: Great. And also about the cadence of the new stores? John Morikis: Yeah. Four in the -- net four, I think it was in the first quarter, we would like to see a little bit more than that. But it’s going to ramp up here between now and the end of the year. We will be in the 80 to 100 before the end of the year. P.J. Juvekar: Great. And one of your competitors has a new partnership at Home Depot to target Pros at the big boxes. Have you seen any impact of that on your business? John Morikis: Well, as I mentioned earlier, we have a model that we believe is the right model in the market. It certainly is for us. We believe painting contractors thrive in a specialty store format with the -- with people behind the counter that have 10 years, 20 years and 30 years of experience with products that were built for them in their specific areas and services that are focused on making them as productive as possible and as profitable as possible. So, I would just say, we welcome with no arrogance the competition. Competition makes you better. I am going to be really big on Sherwin. P.J. Juvekar: Great. Thank you and good to see your confidence. Thank you. John Morikis: Yeah. Operator: Thank you. Your next question is coming from Mike Leithead from Barclays. Your line is live. Mike Leithead: Great. Thanks. Good morning, guys. John Morikis: Good morning, Mike. Mike Leithead: Maybe to start with John, in the release, you talked about the worst the supply chain challenges being behind us, was that mostly a U.S. architectural comment or I guess when you look at your international operations or maybe the legacy Valspar businesses are you seeing conditions there meaningfully improve as well? John Morikis: Yeah. I want to give -- earlier, I mentioned Colin Davie, our CPO and also Heidi Petz, our Chief Operating Officer. I want to give her credit as well and she started in her role on March 1 and I don’t think she came up for air throughout the balance of the quarter out of this area. I mean terrific work by the entire team of really ensuring that we have the raw materials we need, and importantly, where we had it. When we look at what’s been happening, I don’t -- the impact on our architectural business outside of the U.S. is, obviously, a very small part of our business, not significantly impacted by this. The confidence that we have by working with our suppliers and in a partnership way, I think, is why we have this confidence. And again, the talent that we have in procurement and another fellow has to get the attention here. Joe Sladek, our President of our Global Supply Chain is the one that takes all these products and quickly is turning those in to finished goods and getting them to our stores and to our customers in a very nimble and quick way. It’s amazing behind the scenes the things that are happening to be able to convert quickly and take advantage of these opportunities and we expect that to continue going forward. Mike Leithead: Great. Super helpful. And then, second, I was just hoping to drill a bit more into the raw materials basket. Obviously, there’s a lot of focus on oil-based inputs, but just curious what you are seeing on the inorganic side both in TiO2 with color payments? Thank you. Jim Jaye: Yeah, Mike, this is Jim. What I’d say on the oil prices, we talked about probably going to be at the higher end of our guidance this year and part of that is because of the oil prices that we have seen. I think it remains to be seen how long those oil prices are going to stay sustained and I’d remind you really that propylene is more meaningful as an input for us for our resins and solvent than this oil. So oil and propylene are connected over the long-term, but in the short-term, we have seen disconnects in the past. So think as Al said earlier, we will continue to monitor all of these things if we need to go out with more there in terms of price, we will. Your question on the TiO2 side, we have seen inflationary pressures there given the strong demand, there’s tight inventories, and certainly, rising energy costs, which are used to convert the ore into TiO2. We haven’t had any availability issues really there. We are in a good place with our suppliers, I think. So really on the supply chain, we will continue to monitor it. We will get pricing as necessary and we expect it to -- from an availability perspective, that’s really behind us. Mike Leithead: Great. Thank you so much. Jim Jaye: You are welcome, Mike. Operator: Thank you. Your next question is coming from David Begleiter from Deutsche Bank. Your line is live. David Begleiter: Thank you. John, there have been some reports that Sherwin is discounting paint prices in the U.S. Are those reports just inaccurate? John Morikis: Yes. David Begleiter: Very good. And the same trend of the 12% pricing you announced for February 1st, how much are you getting and how is it compared to historical levels? John Morikis: Yeah. David, the price increase has been actually a little bit better than the price increases we went out with last year. So the effectiveness has been maintained and improved as the months have gone on, has it been -- it has been filtered through the market and we feel very good about where that is at right now. David Begleiter: Thank you very much. John Morikis: Thanks, David. Operator: Thank you. Your next question is coming from Kevin McCarthy from Vertical Research. Your line is live. Kevin McCarthy: Yes. Good afternoon. Two questions on Performance Coatings, if I may. First, on the margin side, John, it looks like you made some nice sequential improvement there of 290 basis points. At one time, though, I think, you had a goal of high teens or low 20s, is that still the case for PCG margins, and if so, it looks like volumes are running pretty nicely nowadays. What do you think the path is to get there over the medium-term? John Morikis: Yeah. Kevin, it absolutely is and we have great confidence in our ability to do that. I think you are going to continue to see that with volume. We have obviously seen the pickup in raw material cost has had an impact on it. So the price that has been announced rolls through. That’s going to have an impact. We have also talked publicly about some of the other that are available to us that we are continuing to emphasize and attack. And some of that includes the simplification of our product lines, our raw materials, less complexity going through our plants. I want to be very clear in our confidence and our ability to reach those metrics that we have been talking about. We were gaining some ground on it unfortunately, with the raw material spike. We gave up a little bit of ground in this, but we have got -- this isn’t just Bravado, we are going to do it. We are going to take the -- we have got confidence, we have got plans and we are executing on those. So we are going to deliver on this. Kevin McCarthy: And then, secondly, you acquired Sika’s Industrial Coatings business just recently on April 1st, I believe. I realize it’s not a huge deal. But can you speak to what the opportunity is there and why you chose to do that? John Morikis: Yeah. It’s a -- I think a great example of our M&A strategy, which we have always said, we are not trying to be everything to everyone, everywhere and that we don’t need practice. We are creating shareholder value. And so, when you look at the opportunity to acquire a strong position and protection in Germany with local production, Sherwin-Williams is strong in fire protection in the U.K. also with local production. And our ability to leverage the strength of each and production capabilities in each of the primary markets and drive new corrosion protection and fire protection sales together and then really connect the dot is a terrific opportunity for us. And I think it’s a great example of our ability to identify assets, work with owners and to really capture the best of both. The leadership team, just as we have talked about with Valspar, the leadership team of Sika has also joined us. Thomas Hasler is a very strong leader in the Sika business that’s joined and we believe that the combination of the legacy Sherwin and the new Sika asse
SHW Ratings Summary
SHW Quant Ranking
Related Analysis

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.