We have retained our Neutral recommendation on paint giant
). While healthy momentum in the company's paint business is
encouraging, we remain on the sidelines factoring in currency
headwinds, volatility in raw material pricing and uncertainty
surrounding Comex takeover.
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Both revenues and adjusted earnings for second-quarter 2013,
reported on Jul 18, missed Zacks Consensus Estimates. Revenues
rose year over year as higher paint sales volume and
contributions from acquisitions more than offset negative
Sherwin-Williams, which is among the major paint companies 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.
While the $2.34 billion acquisition of Consorcio Comex S.A. de
C.V. should usher in significant opportunity for Sherwin-Williams
and enable it to expand its architectural paint business in the
Americas, near term uncertainty surrounding the takeover
following the recent rejection of the deal by Mexican regulators
may weigh on the stock.
Moreover, 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' consumer business still remain impacted by the
U.S. economic weakness. We do not expect a material near-term
recovery in the non-residential construction market. Moreover,
Sherwin-Williams is exposed to raw material costs pressure.
Other Stocks to Consider
Other paint companies with favorable Zacks Rank are
The Valspar Corporation
PPG Industries Inc.
) with both retaining a Zacks Rank #2 (Buy).