We have retained our Neutral recommendation on
) following our assessment of its fourth-quarter 2012 results.
The company logged better-than-expected results in the quarter.
However, we maintain a cautious stance factoring in the sustained
weakness across some of its key end markets.
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Sherwin-Williams' fourth quarter revenues and earnings beat the
Zacks Consensus Estimates. Higher paint sales volume and pricing
led to an increase in revenues. The company's Paint Stores Group
division posted healthy results in the quarter.
Sherwin-Williams' philosophy is to diversify its customer base
and expand its operations into various geographies. It follows a
strategy of growth through acquisitions and internal initiatives
such as efficient working capital management and innovation.
The company continues to invest in its Paint Stores Group segment
to boost market share. It is also implementing effective pricing
strategies to offset higher raw materials costs.
Moreover, the $2.34 billion acquisition of Consorcio Comex S.A.
de C.V. should usher in significant opportunity. The acquisition
(expected to complete in first-half 2013) will enable
Sherwin-Williams to expand its architectural paint business in
However, Sherwin-Williams continues to contend with raw material
costs inflation. Higher raw material costs impacted every
reporting segment in the fourth quarter.
Sherwin-Williams also remains exposed to currency headwinds. The
company's Latin American operations are facing soft end-market
demand and unfavorable currency translation impact.
Demand for architectural coatings also remains somewhat
depressed. We do not expect a material near-term recovery in the
housing and commercial construction markets.
Sherwin-Williams currently retains a short-term Zacks Rank #3
Other Stocks to Consider
Other coatings companies with favorable Zacks Rank are
Akzo Nobel NV
PPG Industries Inc.
The Valspar Corporation
). All of them hold a Zacks Rank #2 (Buy).