Personal Finance

Did You Miss Sherwin-Williams Company's Big Move in October?

A man points at a rising stock graph.

What happened

Sherwin-Williams (NYSE: SHW) continues to paint a pretty picture on the stock exchanges, with October turning out to be another big month as the paint and coatings stock soared 10.4%, extending its year-to-date to a jaw-dropping 47% as of Oct. 31. That, despite the company reporting a double-digit percentage drop in net income for the third quarter. What gives?

So what

Sherwin-Williams shares took off after the company reported its third-quarter numbers on Oct. 23. Investors were eagerly awaiting this quarterly report, as they wanted to see how Sherwin-Williams' just-concluded acquisition of Valspar would be reflected in its numbers.

The company didn't disappoint: It reported record quarterly sales of $4.51 billion, up 37% year over year, the bulk of which came from Valspar. Sherwin-Williams' same-store sales in the U.S. and Canada, a figure which includes stores open at least 12 months and is an important gauge of organic growth, jumped 5.2% during the quarter.

A man points at a rising stock graph.

Image source: Getty Images.

The market wisely chose to overlook the 18% year-over-year drop in Sherwin-Williams' net profit. The company would've posted much higher profits if not for the hurricanes that hit its operations and acquisition-related costs. It wasn't the only one to feel the pinch -- peer RPM International also warned investors last month that its ongoing quarter's sales could take a hit because of natural disasters, impacting its second-half numbers.

Now what

Sherwin-Williams now expects to end the year with lower profits than it previously guided for, which at the midpoint could mean a near-5% drop in earnings per share from 2016 levels.

While that may sound worrisome, I think investors should give the company some time to integrate Valspar's operations. Meanwhile, Sherwin-Williams continues to grow its top line at a rapid pace, which should lay the foundation for stronger years ahead. The company is already projecting a significant jump in dividends , giving investors yet another reason to stay invested for the long haul.

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Neha Chamaria has no position in any of the stocks mentioned. The Motley Fool recommends RPM International and Sherwin-Williams. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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