Shares of Sherwin-Williams (SHW) touched a new 52-week high of $211.37 on Jul 17, eclipsing its previous high of $208.63 reached on Mar 7, 2014. Its shares ended the day marginally lower at $210.95.
The paint giant has a market cap of roughly $20.9 billion and has seen its shares rise around 16.7% over the past one year. Its year-to-date return is roughly 15.6%, much higher than the S&P 500’s total return of 7.1%. Average volume of shares traded over the last three months is roughly 525.5K. The company’s long-term projected EPS growth is 12.6%.
What’s Driving SHW Up?
Sherwin-Williams, which is among the leading paint companies along with PPG Industries Inc. (PPG) and Akzo Nobel NV (AKZOY), posted strong second-quarter 2014 results yesterday on the back of healthy gains across its Paint Stores, Consumer and Global Finishes Groups segments.
Sherwin-Williams’ earnings rose roughly 19.5% year over year to $2.94 per share in the second quarter from $2.46 per share a year ago. Its adjusted earnings (barring the acquisition-related impact) were $3.00 per share and surpassed the Zacks Consensus Estimate of $2.90.
Sherwin-Williams recorded net sales of around $3,042 million in the quarter, a 12.1% year-over-year increase. It exceeded the Zacks Consensus Estimate of $2,980 million. Increased paint sales volume of Sherwin-Williams’ Paint Stores Group and favorable impact of acquisitions led to higher sales in the quarter. Acquisitions contributed 4.6% to the revenues increase.
Sherwin-Williams expects consolidated sales to increase 8%–13% year over year in 2014. Consequently, the company increased its earnings guidance for 2014 to a range of $8.50 to $8.70 per share from $8.12 to $8.32 per share expected previously.
Sherwin-Williams follows a strategy of growth through acquisitions and internal initiatives such as efficient working capital management and innovation. Its philosophy is to diversify its customer base and expand its operations into various geographies.
Sherwin-Williams’ aggressive cost control initiatives, working capital reductions, supply chain optimization and productivity improvement should continue to yield margin benefits. It is also implementing effective pricing strategies to offset higher raw material costs. The company also remains committed to deliver incremental returns to shareholders.
Sherwin-Williams is a Zacks Rank #3 (Hold) stock.
The Valspar Corporation (VAL) is another paint company worth considering with a Zacks Rank #2 (Buy).