) earnings rose roughly 19.5% year over year to $2.94 per share in
the second quarter of 2014 from $2.46 per share a year ago.
Earnings for the second quarter include an unfavorable impact of 6
cents per share related to acquisitions.
Barring that acquisition-related impact, earnings of $3.00 per
share surpassed the Zacks Consensus Estimate of $2.90.
Sherwin-Williams, whose well-known brands include Dutch Boy, Minwax
and Krylon, recorded net sales of around $3,042 million in the
quarter, a 12.1% year-over-year rise. It exceeded the Zacks
Consensus Estimate of $2,980 million.
Increased paint sales volume of Sherwin-Williams' Paint Stores
Group and favorable impact of acquisitions led to higher sales in
the quarter. Acquisitions contributed 4.6% to the rise in revenues
in the quarter while currency swings had an unfavorable impact of
Sherwin-Williams, in Sep 2013, completed its takeover of the
U.S. and Canadian businesses of Mexico's leading paint company,
Consorcio Comex S.A. de C.V., for $90 million in cash and assumed
liability of around $75 million. The acquisition is expected to
contribute to the company's top line growth this year.
The Paint Stores Group unit registered net sales of $1.88
billion in the reported quarter, up 17.2% from the year-ago
quarter. The gain was led by increased architectural paint sales
volume across all end market segments and acquisition. The group
led with higher sales volume and operating results.
Net sales of the Consumer Group unit rose 10.1% to $433.4
million due to acquisitions and higher volume sales to most of the
company's retail customers. Acquisitions increased net sales of the
segment by 5% in the reported quarter. The segment improved its
operating results through increased volume sales and operating
Net sales from the Global Finishes Group segment went up 6.1% to
$544.6 million in the quarter due to higher selling prices, and
higher paint sales volumes. Unfavorable currency translation
reduced sales by 0.3%.
The Latin America Coatings Group net sales fell 8.9% to $181.2
million as higher selling prices were offset by unfavorable
currency translation, which reduced sales by 11.3%, and lowered
paint sales volume. The Latin America Group is taking measures and
increasing its selling prices and also reducing costs in order to
improve its operating margins.
Financials and Shareholder Returns
Sherwin-Williams' working capital ratio as of Jun 30, 2014, was
11.7% compared with 12% last year.
Sherwin-Williams bought back 2.03 million shares through open
market purchases in the reported quarter. The company had remaining
authorization to repurchase 8.83 million shares as of Jun 30, 2014.
During the quarter, Sherwin-Williams hiked its quarterly dividend
to 55 cents per share from 50 cents per share.
Sherwin-Williams, which is among the leading paint companies along
PPG Industries Inc.
Akzo Nobel NV
), expects consolidated sales to increase 8%-13% year over year in
2014. At this level, the company increased its earnings guidance
for 2014 to a range of $8.50 to $8.70 per share from $8.12 to $8.32
per share expected previously. This is above the current Zacks
Consensus Estimate of $8.42.
The guidance assumes that the Comex acquisition will increase net
sales by a low-single-digit percentage in the year and negatively
impact earnings per share by 35 cents per share in 2014.
For the third quarter, Sherwin-Williams expects consolidated net
sales to rise 9%-14% year over year. The company expects earnings
per share in the range of $3.15 to $3.25 per share for the quarter.
The Zacks Consensus Estimate for the quarter currently stands at
$3.05. The guidance assumes that the Comex acquisition will
increase net sales in the range of $120 million to $130 million and
unfavorably impact earnings per share by 5 cents in the third
Sherwin-Williams is a Zacks Rank #2 (Buy) stock.
Another paint company, T
he Valspar Corporation
), retains a Zacks Rank #2 (Buy).
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