Balanced View on Sherwin-Williams - Analyst Blog

By
A A A

On Oct 28, we reaffirmed our Neutral recommendation on paint giant Sherwin-Williams ( SHW ). 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.

Why Held?

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 with Akzo Nobel NV ( AKZOY ), 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. ( RPM ) and PPG Industries Inc. ( PPG ) with both retaining a Zacks Rank #2 (Buy).



AKZO NOBEL NV (AKZOY): Get Free Report

PPG INDS INC (PPG): Free Stock Analysis Report

RPM INTL INC (RPM): Free Stock Analysis Report

SHERWIN WILLIAM (SHW): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: AKZOY , PPG , RPM , SHW

Zacks.com

Zacks.com

More from Zacks.com:

Related Videos

Stocks

Referenced

100%
100%
100%

Most Active by Volume

55,414,702
  • $15.38 ▼ 0.39%
38,503,210
  • $66.34 ▲ 2.26%
36,466,704
  • $8.36 ▼ 9.52%
35,253,294
  • $26.55 ▲ 1.34%
32,752,347
  • $6.55 ▲ 1.87%
31,778,001
  • $95.22 ▲ 0.19%
28,396,556
  • $51.49 ▼ 0.62%
23,800,987
  • $42.09 ▲ 0.97%
As of 7/11/2014, 04:03 PM