) third-quarter 2013 adjusted earnings of $2.68 per share beat
the Zacks Consensus Estimate of $2.62. The results exclude
one-time items including 13 cents per share charge resulting from
a government import duty assessment related to the company's
Including one time items, earnings came in at $2.55 per share,
up roughly 14% from $2.24 per share a year ago. The improvement
was driven by improved results of the Paint Stores, Consumer and
Global Finishes Groups.
Revenues, Costs and Margins
Sherwin-Williams, which is among the leading paint companies
PPG Industries Inc.
Akzo Nobel NV
), posted net sales of $2.85 billion in the quarter, a 9.4% year
over year rise. It surpassed the Zacks Consensus Estimate of
The improvement was driven by positive impact of acquisitions
and increased paint sales volume of Sherwin-Williams' Paint
Stores Group. Acquisitions contributed 1.1% to the increase in
consolidated net sales in the quarter while currency swings had
an unfavorable impact of 0.8%.
Cost of sales in the third quarter was $1.55 billion, up 6.8%
year over year. Gross profit increased 12.6% year over year to
$1.29 billion. Selling, general and administrative expenses went
up 11.3% year over year to $890 million.
Performance by Segment
The Paint Stores Group posted net sales of $1.76 billion in
the reported quarter, up 13.5% from the year-ago period. The
improvement largely stemmed from the increase in architectural
paint sales volume across all end market segments. Segment profit
increased 19.6% to $359.4 million mainly due to higher paint
sales volume, partially offset by increases in selling, general
and administrative expenses.
Net sales of the Consumer Group unit increased 5.4% to $366.8
million due to timing of seasonal shipments to some customers.
Segment profit increased 28% to $73.1 million in the quarter from
$57.1 million in the year ago quarter, mainly due to higher
volume sales and improved operating efficiencies. Acquisitions
increased net sales of Consumer Group segment by 0.2% in the
Net sales from the Global Finishes Group segment went up 3.2%
to $507.3 million in the quarter as a result of selling price
increases and acquisitions. The segment's profit jumped 22.3% to
$44.5 million. The growth was fueled by increased selling price,
improved operating efficiencies and good cost control.
The Latin America Coatings Group net sales remained flat at
$208.6 million in the quarter as selling price increases
and higher paint sales volume was offset by unfavorable currency
translation. Segment profit plunged 95.4% to $1 million in the
quarter due to charges relating to the Brazil import duty
assessment, partly offset by selling price increases and higher
paint sales volume. The company recorded charges of $19.8 million
related to import duty taxes paid to the Brazilian
Sherwin-Williams acquired 1.5 million shares through open
market purchases in the reported quarter. The company had
remaining authorization to purchase 13.65 million shares as of
Sep 30, 2013.
Sherwin-Williams has 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 a strategic fit for
Sherwin-Williams and will enable it to better serve its customers
across some of its key markets.
Comex sells paints and coatings under a host of brands in the
U.S. and Canada. Its operations across these markets consist of
234 and 80 company operated stores in the U.S. and Canada,
Sherwin-Williams, in Nov 2012, agreed to buy Comex for roughly
$2.34 billion, including debt. While the company has closed the
takeover of its U.S. and Canadian businesses, it remains
committed to secure the green light from the Federal Competition
Commission of Mexico to complete the acquisition of Comex's core
For the fourth quarter, Sherwin-Williams expects consolidated
sales to increase 5%-7% year over year. It expects earnings per
share in the band of $1.29 to $1.39 for the quarter.
Sherwin-Williams anticipates that the Comex acquisition which
was completed in Sep 2013 will increase net sales by $95 million
to $105 million. However, the acquisition will have an
unfavorable impact on net income per common share of nearly 20
cents to 40 cents per share in the fourth quarter.
For 2013, Sherwin-Williams anticipates that consolidated net
sales would increase by a mid single-digit clip over 2012. It has
reduced its earnings per share guidance for 2013 which is now
expected in the range of $7.00 to $7.30 per share compared with
the previous guidance of $7.45 to $7.55 per share.
Sherwin-Williams currently retains a Zacks Rank #2 (Buy).
Another company in the paints industry,
RPM International Inc.
), retains a Zacks Rank #2 (Buy).
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