Fitch Ratings Services has reaffirmed its long-term issuer
default rating (IDR), senior unsecured debt and bank credit
facility ratings on
The Sherwin Williams Company
) at 'A.' The rating agency has also maintained its short-term IDR
and commercial paper rating on the company at 'F1.' Moreover, Fitch
has conferred a stable outlook on the company.
The reaffirmation of the rating is based on the company's leading
market position in the architectural coatings industry. The company
is always on the look out for diversifying its customer base and
expanding its operations into various geographies. The company
primarily intends to grow through acquisitions and internal
initiatives such as efficient working capital management and
Sherwin-Williams' Consumer segment is recovering with improving
domestic and international sales of automotive finishes, original
equipment manufacturers' product finishes, and protective and
marine coatings. The company's Paint segment has also rebounded
based on a favorable mix reversion to professional contractors from
the do-it-yourself channel.
However, the cyclical nature of the company's end markets, volatile
raw material costs and relatively aggressive growth strategy remain
concerns for the company.
Last month, Sherwin-Williams released its second quarter 2012
results. The company reported net earnings of $2.21 per share in
the quarter versus $1.74 per share in the year-ago quarter. The
results surpassed the Zacks Consensus Estimate of $2.12.
The second-quarter 2012 earnings excluded negative impact of 4
cents from currency translation, while second-quarter 2011 earnings
included charges of 8 cents related to repurchase of long-term
debt. Including these charges, earnings came in at $2.17 per share
in the reported quarter compared with $1.66 in the year-ago
Net sales for the quarter increased 9.3% year over year to $2.57
billion, missing the Zacks Consensus Estimate of $2.68 billion. The
growth was driven by higher paint sales volume and selling price,
partially offset by negative impacts of currency translation.
Due to its strong cash generation, Sherwin-Williams acquired 1.5
million shares of its common stock through open market purchases in
the reported quarter. The company had 17.75 million shares
remaining under its existing share repurchase authorization as of
June 30, 2012.
The company expects to maintain financial stability and keep
expanding through acquisitions. However, stiff competition and
rising raw material prices represent challenges for the company.
DU PONT (EI) DE (DD): Free Stock Analysis
PPG INDS INC (PPG): Free Stock Analysis Report
SHERWIN WILLIAM (SHW): Free Stock Analysis
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Sherwin-Williams competes with companies like
E. I. du Pont de Nemours and Company
PPG Industries Inc.
). The company retains a Zacks #2 Rank (Buy) for the short term and
we have a long-term Neutral recommendation on the stock.