On Oct 28, we reaffirmed our Neutral recommendation on paint
). While we are encouraged by sustained healthy momentum in the
company's paint business, we maintain a cautious stance factoring
in currency headwinds and volatility in raw material pricing.
Both revenues and adjusted earnings for third-quarter 2013,
reported on Oct 25, beat Zacks Consensus Estimates. Revenues rose
roughly 9% year over year on higher paint sales volumes and
contributions from acquisitions. The company, however, reduced
its earnings outlook for 2013.
Sherwin-Williams, which is among the major paint companies along
Akzo Nobel NV
), follows a strategy of growth through acquisitions and internal
initiatives such as efficient working capital management and
innovation. Its philosophy is to diversify its customer base and
expand its operations into various geographies.
Sherwin-Williams continues to invest in its Paint Stores Group
segment to boost market share. It is also implementing effective
pricing strategies to offset higher raw material costs.
Sherwin-Williams also remains committed to deliver incremental
returns to shareholders.
Moreover, the acquisition of the U.S. and Canadian businesses of
Consorcio Comex S.A. de C.V. has ushered in significant
opportunity for Sherwin-Williams. The acquisition is a strategic
fit for the company and will enable it to better serve its
customers across some of its key markets.
However, Sherwin-Williams remains exposed to currency headwinds.
The company's Latin American operations are facing soft
end-market demand and unfavorable currency translation impact.
Sherwin-Williams is also exposed to raw material costs pressure.
Moreover, we do not expect a material near-term recovery in the
non-residential construction market.
In addition, integration costs associated with the takeover of
Comex's U.S. and Canadian businesses are expected to dilute
Sherwin-Williams' earnings in the fourth quarter. Factoring in
that impact, the company has cut its earnings forecast for 2013.
Other Stocks to Consider
Other paint companies with favorable Zacks Rank are
RPM International Inc.
PPG Industries Inc.
) with both retaining a Zacks Rank #2 (Buy).
AKZO NOBEL NV (AKZOY): Get Free Report
PPG INDS INC (PPG): Free Stock Analysis
RPM INTL INC (RPM): Free Stock Analysis
SHERWIN WILLIAM (SHW): Free Stock Analysis
To read this article on Zacks.com click here.