) reported first-quarter 2013 earnings of $1.11 per share,
surpassing the Zacks Consensus Estimate of $1.08 and exceeding
the prior-year quarter's earnings of 95 cents per share. While
unfavorable currency translation reduced earnings by 2 cents a
share, acquisitions had no material impact.
Sherwin-Williams, which is among the leading coatings companies
PPG Industries Inc.
Akzo Nobel NV
The Valspar Corporation
), posted net sales of $2.17 billion in the quarter, a 1.4% year
over year rise. It met the Zacks Consensus Estimate. The
improvement was driven by a positive impact of acquisitions and
an increase in paint sales volume, partly offset by the negative
impacts of currency translation.
Cost of sales in the first quarter was $1.2 billion, flat year
over year. Gross profit increased 6% year over year to $963
million. Consequently, gross margin expanded 180 basis points
(bps) to 44% in the quarter.
Selling, general and administrative expenses went up 3% year over
year to $779 million. Operating profit rose 21% to $184 million.
Operating margin increased 140 bps to 8.5% in the quarter.
Performance by Segment
The Paint Stores Group posted net sales of $1.17 billion in the
reported quarter, up 4% from the year-ago period. The improvement
largely stemmed from the increase in architectural paint sales
volume across all market segments. Segment profit increased 15%
to $129.7 million due to higher paint sales volume and selling
prices, partly offset by soaring raw material prices as well as
selling, general and administrative expenses.
Net sales of the Consumer Group unit decreased 3.7% to $308.6
million due to the elimination of a portion of a paint program
with a large number of retail customers, partly offset by
acquisitions. Segment profit declined 2% to $54 million in the
quarter from $55.3 million in the year ago quarter, primarily due
to lower sales volume.
Net sales from the Global Finishes Group segment went up
marginally by 0.8% to $486.8 million in the quarter as a result
of selling price increases and acquisitions, partly offset by
unfavorable currency translation. The segment's profit jumped 18%
to $33.9 million from $28.6 million in the year ago quarter. The
growth was fueled by increased selling price, increased paint
sales volume, and efficiencies gained, partly offset by
unfavorable currency translation and acquisitions.
The Latin America Coatings Group sales decreased 2.9% to $202.6
million in the quarter due to negative impact of currency
translation, partly offset by an increase in selling price.
Segment profit jumped 4.5% to $20.8 million in the quarter from
$19.9 million in the previous year quarter, primarily due to good
expense control and selling price increases, partly offset by
unfavorable foreign currency translation rate changes.
Sherwin-Williams acquired 0.5 million shares through open market
purchases in the reported quarter. The company had remaining
authorization to purchase 15.95 million shares as of Mar 31,
Cash and cash equivalents were $613 million as of Mar 31, 2013,
compared with $25 million as of Mar 31, 2012. Long-term debt
stood at $1.6 billion as of Mar 31, 2013, compared with $637
million as of Mar 31, 2012.
For first-quarter 2013, capital expenditures were $31 million,
compared with $33 million in the prior-year quarter.
Debt-to-capitalization ratio expanded 170 bps year over year to
47% as of Mar 31, 2013.
For the second quarter of 2013, the company expects consolidated
sales to increase 5%-9% year over year. It expects earnings per
share in the band of $2.50 to $2.60 for the quarter.
For 2013, the company anticipates that consolidated net sales
would increase by a mid single-digit clip over 2012. It forecasts
net income per share to be in the range of $7.45 to $7.55 per
Sherwin-Williams continues to invest in its core Paint Stores
Group to boost market share. The company follows a strategy to
diversify its customer base and expand its operations into
various geographies which will reduce its dependency upon
prevailing market conditions. An improvement in the market demand
in the near term will place the company in a better position.
Sherwin-Williams is maintaining its approach of growing through
acquisitions and also through internal initiatives such as
efficient working capital management and innovation. Moreover,
the acquisition of Comex should usher in significant opportunity.
However, soaring raw material prices remain a concern for the
company. It also remains exposed to currency headwinds.
Sherwin-Williams currently retains a short-term Zacks Rank #2
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