On Feb 4, we reaffirmed our Neutral recommendation on paint
). While we are encouraged by continued strength in the company's
paint business and its commitment to boost shareholder returns,
we maintain a balanced stance considering currency headwinds,
volatility in raw material costs and dilutive impact of
Pros and Cons of SHW
Sherwin-Williams, a Zacks Rank #3 (Hold) stock, saw its profit
zoom roughly 71% year over year in fourth-quarter 2013, reported
on Jan 30, on gains across its Paint Stores Group and Consumer
Group divisions. However, adjusted earnings missed the Zacks
Consensus Estimate. Revenues rose by double-digit clip year over
year on higher paint sales volume and contributions from
acquisitions and beat expectations.
Sherwin-Williams, which is among the major paint makers 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. The company returned over 90% of its net
operating cash flow to its shareholders in 2013 through dividends
and share repurchases.
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.
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. Sherwin-Williams is
also optimistic about completing the acquisition of Comex's core
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 also continues to contend with raw material cost
pressure, primarily for propylene and titanium dioxide (a key
paint pigment). 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 first quarter. The company sees
an unfavorable currency impact of 45 cents to 55 cents per share
associated with the buyout on its earnings for full-year 2014.
Other Stocks to Consider
Other paint stocks sporting favorable Zacks Rank are
RPM International Inc.
PPG Industries Inc.
) with both holding a Zacks Rank #2 (Buy).