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Sherwin-Williams (SHW) Up 7.8% Since Last Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for Sherwin-Williams (SHW - Free Report) . Shares have added about 7.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Sherwin-Williams due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Sherwin-Williams' Q2 Earnings Top Estimates, Sales Lag
Sherwin-Williams logged second-quarter 2024 earnings (as reported) of $3.50 per share, up around 14% from $3.07 in the year-ago quarter.
Barring one-time items, adjusted earnings were $3.70 per share, which surpassed the Zacks Consensus Estimate of $3.51.
Sherwin-Williams posted revenues of roughly $6.27 billion, up around 0.5% year over year. The figure missed the Zacks Consensus Estimate of $6.35 billion. Consolidated net sales rose mainly owing to increased sales volumes in the Paint Stores and Performance Coatings Groups, which were partly offset by reduced sales volumes in the Consumer Brands Group, taking into account the impact of the China architectural business divestment in 2023.
Segmental Review
The Paint Stores Group segment registered net sales of roughly $3.62 billion in the second quarter, up around 3.5% year over year. The figure missed the Zacks Consensus Estimate of $3.64 billion. Net sales in the segment increased primarily as a result of low-single-digit sales volume growth and the sustained realization of higher selling prices. Net sales increased in all end markets, led by residential repaint, new residential, commercial, protective, and marine, with the exception of property maintenance, which fell slightly year over year.
Net sales in the Consumer Brands Group segment declined 10.7% year over year to $844.3 million, missing the consensus estimate of $923.4 million. Net sales of the segment dropped primarily due to a mid-single-digit percentage sales volume decline as a result of weak DIY demand in North America, a 2% impact from the divestiture of the China architectural business in 2023, and a 2% impact from unfavorable currency translation.
Net sales in the Performance Coatings Group rose roughly 0.6% year over year to around $1.81 billion in the reported quarter, beating the consensus estimate of $1.79 billion. Performance Coating’s net sales increased primarily due to 1.7% incremental sales from an acquisition, which were slightly offset by a 1% negative currency translation. Sales volumes were varied by region and business. Industrial Wood, Coil, and Automotive Refinish in North America aided the performance, which was partly offset by a fall in General Industrial across all regions.
Financials
During the first six months of 2024, the company generated $1.14 billion in net operating cash. It returned $1.34 billion to shareholders in the form of dividends and 3.1 million shares of common stock repurchases. As of Jun 30, 2024, Sherwin-Williams had remaining authorization to purchase 36.5 million shares of its common stock in open market transactions.
Outlook
Sherwin-Williams raised its adjusted earnings guidance for 2024. The company expects consolidated net sales to be up a low-single-digit percentage year over year for the third quarter. For 2024, it is projected to be up a low-single-digit percentage.
The company expects earnings per share for 2024 to be in the range of $10.3-$10.6. Adjusted earnings are now projected to be $11.10-$11.40 per share for the year. The company expects the effective tax rate to be low by 20%.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
VGM Scores
Currently, Sherwin-Williams has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Sherwin-Williams has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Sherwin-Williams (SHW) Up 7.8% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Sherwin-Williams (SHW - Free Report) . Shares have added about 7.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Sherwin-Williams due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Sherwin-Williams' Q2 Earnings Top Estimates, Sales Lag
Sherwin-Williams logged second-quarter 2024 earnings (as reported) of $3.50 per share, up around 14% from $3.07 in the year-ago quarter.
Barring one-time items, adjusted earnings were $3.70 per share, which surpassed the Zacks Consensus Estimate of $3.51.
Sherwin-Williams posted revenues of roughly $6.27 billion, up around 0.5% year over year. The figure missed the Zacks Consensus Estimate of $6.35 billion. Consolidated net sales rose mainly owing to increased sales volumes in the Paint Stores and Performance Coatings Groups, which were partly offset by reduced sales volumes in the Consumer Brands Group, taking into account the impact of the China architectural business divestment in 2023.
Segmental Review
The Paint Stores Group segment registered net sales of roughly $3.62 billion in the second quarter, up around 3.5% year over year. The figure missed the Zacks Consensus Estimate of $3.64 billion. Net sales in the segment increased primarily as a result of low-single-digit sales volume growth and the sustained realization of higher selling prices. Net sales increased in all end markets, led by residential repaint, new residential, commercial, protective, and marine, with the exception of property maintenance, which fell slightly year over year.
Net sales in the Consumer Brands Group segment declined 10.7% year over year to $844.3 million, missing the consensus estimate of $923.4 million. Net sales of the segment dropped primarily due to a mid-single-digit percentage sales volume decline as a result of weak DIY demand in North America, a 2% impact from the divestiture of the China architectural business in 2023, and a 2% impact from unfavorable currency translation.
Net sales in the Performance Coatings Group rose roughly 0.6% year over year to around $1.81 billion in the reported quarter, beating the consensus estimate of $1.79 billion. Performance Coating’s net sales increased primarily due to 1.7% incremental sales from an acquisition, which were slightly offset by a 1% negative currency translation. Sales volumes were varied by region and business. Industrial Wood, Coil, and Automotive Refinish in North America aided the performance, which was partly offset by a fall in General Industrial across all regions.
Financials
During the first six months of 2024, the company generated $1.14 billion in net operating cash. It returned $1.34 billion to shareholders in the form of dividends and 3.1 million shares of common stock repurchases. As of Jun 30, 2024, Sherwin-Williams had remaining authorization to purchase 36.5 million shares of its common stock in open market transactions.
Outlook
Sherwin-Williams raised its adjusted earnings guidance for 2024. The company expects consolidated net sales to be up a low-single-digit percentage year over year for the third quarter. For 2024, it is projected to be up a low-single-digit percentage.
The company expects earnings per share for 2024 to be in the range of $10.3-$10.6. Adjusted earnings are now projected to be $11.10-$11.40 per share for the year. The company expects the effective tax rate to be low by 20%.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
VGM Scores
Currently, Sherwin-Williams has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Sherwin-Williams has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.