Earnings Preview: Sherwin Williams - Analyst Blog


Sherwin Williams Company ( SHW ) is scheduled to report its second-quarter 2012 results before the market opens on Thursday, July 19. The Zacks Consensus Estimate for the quarter is $2.11 per share, representing an estimated year-over-year increase of 27.1%.

With respect to earnings surprises, Sherwin Williams has outperformed the Zacks Consensus Estimate in three of the trailing four quarters. Despite this, it has delivered an average negative earnings surprise of 0.25% over the past four quarters due to a negative earnings surprise of 6.2% in the second quarter of 2011. The average negative earnings surprise of 0.25% implies that the company has failed to meet the Zacks Consensus Estimate by that measure over the last four quarters.

First-Quarter Synopsis

Sherwin-Williams reported net earnings of 95 cents per share in the first quarter of the year versus 63 cents per share in the year-ago quarter. It surpassed the Zacks Consensus Estimate by a penny.

Net sales for the quarter increased 15.1% year over year to $2.14 billion, exceeding the Zacks Consensus Estimate of $2.10 billion. The growth was driven by an increase in paint sales volume and selling price.

Company's Outlook

For the second quarter of 2012, Sherwin-Williams expects consolidated sales to increase in the range of 10% to 15% year over year. The company expects earnings per share in the band of $1.92-$2.07 for the quarter.

For full year 2012, the company anticipates consolidated net sales to increase above the 2011 levels by a high single-to-low-teens percentage. It has revised the earnings per share guidance upwards to $5.75-$6.05 from its previous range of $5.37-$5.67.

Estimate Revisions Trend


In the past 30 days, out of 12 analysts covering the stock, 1 analyst has lowered its estimates for the second quarter while one has moved in the opposite direction. Over the last seven days, none of the analysts made any upward or downward revision of their estimates.

Estimates for 2012 portray almost a similar trend. Of the 12 analysts covering the stock, 1 analyst lowered its estimates for the year over the last 30 days while one moved in the upward direction.


Recently, the Zacks Consensus Estimate for the second quarter has been increased to $2.11 per share from $2.09 in the last 30 days. Over the 90-day period, the Zacks Consensus Estimate increased from $2.03 to $2.11 per share for the second quarter. The Zacks Consensus Estimate for 2012 is $6.16, representing an estimated year-over-year increase of 25.2%.

Our Viewpoint

Despite weak housing markets, the company continues to invest in its core Paint Stores Group in order to boost market share. The Paint segment has also revived with a favorable mix towards professional contractors and away from the do-it-yourself channel. The company is focused on capturing a larger share of its end-markets by increasing the number of stores. We expect Sherwin Williams will continue to expand its footprint through meaningful acquisitions and consolidate the North American paint industry.

However, raw material prices remain a cause of concern for the company. The company experiences weak pricing power in the Consumer and Paint segments. Furthermore, it faces stiff competition from PPG Industries Inc. ( PPG ).

In light of the favorable conditions, the company retains a Zacks #2 Rank, indicating a short-term (1 to 3 months) Buy rating. However, we have maintained a long-term (more than 6 months) Neutral recommendation on the stock due to headwinds.

PPG INDS INC (PPG): Free Stock Analysis Report
SHERWIN WILLIAM (SHW): Free Stock Analysis Report

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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: PPG , SHW



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