) third-quarter 2012 adjusted earnings of $2.29 per share
surpassed the Zacks Consensus Estimate of $2.19. The adjusted
earnings exclude a negative currency translation impact of 5
cents a share. Including that impact, earnings were $2.24 per
share in the reported quarter compared with $1.71 a year ago.
Net sales for the quarter increased 4.8% year over year to
$2.60 billion, but missed the Zacks Consensus Estimate of $2.67
billion. The growth was driven by an increase in paint sales
volume and selling price, partially offset by the negative
impacts of currency translation.
Performance by Segment
The Paint Stores Group posted net sales of $1.55 billion in
the reported quarter, up 9.6% from the year-ago period. The
improvement largely stemmed from the increase in paint sales
volume across all market segments as well as higher selling
Segment profit increased 26.9% to $300.6 million due to higher
paint sales volume and selling price, partly offset by soaring
raw material prices as well as selling, general and
Net sales of the Consumer Group went down 1% to $348 million,
due to lower sales volumes to most of the retail customers, which
were mostly offset by acquisitions and higher selling prices.
Segment profit climbed 39.3% to $57.1 million in the quarter.
The increase was due to a rise in selling prices and better
operating efficiencies, partly offset by escalating raw material
Net sales from the Global Finishes Group declined 1% to $491.8
million in the quarter as a result of unfavorable currency
translation and lower paint sales volume, partly offset by
selling price increases.
The segment's profit was $36.4 million, a 31.9% year over year
surge. The growth was fueled by increased selling price, partly
offset by increased raw material costs and unfavorable currency
The Latin America Coatings Group sales declined 4% to $208.7
million in the quarter due to unfavorable currency translation,
partly offset by selling price increases and higher paint sales
Segment profit jumped 37.7% to $21.9 million in the quarter
from $15.8 million in the previous year quarter, primarily due to
selling price increases and higher paint sales volume.
Sherwin-Williams acquired 0.5 million shares through open
market purchases in the reported quarter. The company had
remaining authorization to purchase 17.25 million shares as of
September 30, 2012.
For the fourth quarter of 2012, the company expects
consolidated sales to increase in the mid single-digits year over
year. It expects earnings per share in the band of 98 cents to
$1.18 for the quarter.
For fiscal 2012, the company anticipates that consolidated net
sales would increase by a high single-digit clip over 2011. It
has revised the forecast for earnings per share upwards to a
range of $6.35-$6.55 from the previous view of $6.20 to
Sherwin-Williams' philosophy is to diversify its customer base
and expand its operations into various geographies. The company
follows a strategy of growing through acquisitions and also
through internal initiatives such as efficient working capital
management and innovation. This policy enables the company to
somewhat reduce its dependency upon prevailing market
However, Sherwin-Williams is facing higher raw material costs,
primarily acrylic latex and titanium dioxide (a key paint
pigment) in the Consumer group segment. The segment purchases raw
materials for the company.
Sherwin-Williams competes with companies like
E. I. du Pont de Nemours and Company
PPG Industries Inc.
). The company retains a short-term Zacks #2 Rank (Buy). We have
a long-term Neutral recommendation on the stock.
DU PONT (EI) DE (DD): Free Stock Analysis
PPG INDS INC (PPG): Free Stock Analysis
SHERWIN WILLIAM (SHW): Free Stock Analysis
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