On Aug 3, Zacks Investment Research downgraded T
he Sherwin-Williams Company
) to a Zacks Rank #5 (Strong Sell).
Why the Downgrade?
Sherwin-Williams missed estimates in the second quarter of 2013,
reported on Jul 18. The company's adjusted earnings of $2.56 per
share missed the Zacks Consensus Estimate of $2.58 but exceeded
the prior-year quarter's earnings of $2.17 per share. Its net
sales of $2.71 billion in the quarter, represented a 5.5% year
over year rise. It, however, missed the Zacks Consensus Estimate
of $2.78 billion.
Sherwin-Williams is exposed to currency headwinds, volatility in
raw material pricing and uncertainty surrounding Comex takeover.
Sherwin-Williams' consumer and paint stores businesses still
remains impacted by the U.S. economic weakness. Sales of
architectural paint to the commercial market also remained weak,
as did industrial coatings. Although demand in these end markets
improved recently, it remains weak. A material near-term recovery
in the housing and construction markets seems difficult.
Sherwin-Williams' Latin American operations is facing weak
end-market demand and unfavorable currency translation (stemming
from a stronger U.S. dollar). Currency translation impacted the
company's Latin American operations and Global Finishes Group in
the second quarter. Sherwin-Williams is expected to continue to
face currency headwinds in 2013, particularly in its Latin
Sherwin-Williams continues to face volatility in raw material
costs, primarily for acrylic latex, propylene and titanium
dioxide (a key paint pigment). While the acquisition of Comex
should bring significant opportunity for Sherwin-Williams, near
term uncertainty surrounding the takeover following the recent
rejection of the deal by Mexican regulators may weigh on the
The Zacks Consensus Estimate for 2013 for Sherwin-Williams has
gone down 5.1% to $7.66 per share as most estimates were revised
lower over the last 30 days. Similarly, the Zacks Consensus
Estimate for 2014 has also decreased 5.9% to $9.24 per share.
Other Stocks to Consider
Other companies in the specialty chemical space with favorabe
Zacks Rank are
KMG Chemicals Inc.
Sensient Technologies Corporation
). While Ferro retains a Zacks Rank #1 (Strong Buy), KMG
Chemicals and Sensient Technologies retain a Zacks Rank #2
FERRO CORP (FOE): Free Stock Analysis Report
KMG CHEMICALS (KMG): Free Stock Analysis
SHERWIN WILLIAM (SHW): Free Stock Analysis
SENSIENT TECH (SXT): Free Stock Analysis
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