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What Makes Sherwin-Williams a Solid Investment Option Now?

Anindya Barman
·4 min read

The Sherwin-Williams Company SHW is benefiting from favorable demand in its domestic end-use markets, focus on growth through expansion of operations and productivity improvement initiatives. The company’s shares have gained roughly 19% over the past three months.

We are positive on the company’s prospects and believe that the time is right for you to add the stock to the portfolio as it looks poised to carry the momentum ahead.

Sherwin-Williams currently carries a Zacks Rank #2 (Buy) and a VGM Score of B. Our research shows that stocks with a VGM Score of A or B, combined with a Zacks Rank #1 (Strong Buy) or 2, offer the best investment opportunities for investors.

Let’s delve deeper into the factors that make this paints and coatings giant an attractive choice for investors right now.

Price Performance

Shares of Sherwin-Williams have rallied 24.5% over a year against the 22.4% growth of its industry. It has also outperformed the S&P 500’s 14.4% rise over the same period.

 

 

Upbeat Outlook

The company, last month, said that it now expects consolidated net sales for the third quarter to rise 3-5% year over year. This compares to its earlier expectation of up or down a low-single-digit percentage for third-quarter consolidated net sales on a year-over-year basis.

For 2020, Sherwin-Williams now expects consolidated net sales to be flat-to-up slightly on a year-over-year basis. In its prior guidance issued in July, the company stated that consolidated net sales for 2020 to be roughly flat year over year.

Moreover, the company now expects earnings per share to be $20.96-$21.46 for 2020 compared with its prior guidance of $19.21-$20.71 issued in July.

Estimates Going Up

Over the past two months, the Zacks Consensus Estimate for Sherwin-Williams for the current year has increased 3.3%. The consensus estimate for 2021 has also been revised 2.5% upward over the same time frame.

Positive Earnings Surprise History

Sherwin-Williams has outpaced the Zacks Consensus Estimate in three of the trailing four quarters. In this time frame, it has delivered an earnings surprise of 6.6%, on average.

Cash Deployment

The company remains committed to boost returns to its shareholders. It repurchased 1.7 million shares of its common stock in the first half of 2020. Sherwin-Williams, earlier this year, also hiked its quarterly dividend by 18.6% to $1.34 per share. It remains committed to maintain this dividend payout through the balance of 2020.

Growth Drivers in Place

Sherwin-Williams is benefiting from the strength in architectural paint markets in North America. It is witnessing higher demand for architectural DIY (Do It Yourself) paint in North America.

The company recently said that demand for architectural coatings in the third quarter was stronger-than-expected, mainly driven by new residential, DIY and residential repaint units.

Moreover, Sherwin-Williams remains committed to expand its retail operations. It is focused on capturing a larger share of its end-markets. The company plans to open around 50 new stores in 2020.

The company is also gaining from synergies of the Valspar acquisition. Its cost-control initiatives, working capital reductions, supply chain optimization and productivity improvement are also yielding margin benefits.

 

The SherwinWilliams Company Price and Consensus

 

The SherwinWilliams Company Price and Consensus
The SherwinWilliams Company Price and Consensus

The SherwinWilliams Company price-consensus-chart | The SherwinWilliams Company Quote

 

Stocks to Consider

Other top-ranked stocks worth considering in the basic materials space include Agnico Eagle Mines Limited AEM, Yamana Gold Inc. AUY and New Gold Inc. NGD.

Agnico Eagle has a projected earnings growth rate of 91.8% for the current year. The company’s shares have rallied around 42% in a year. It currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Yamana Gold has an expected earnings growth rate of 84.6% for the current year. The company’s shares have surged around 61% in the past year. It currently carries a Zacks Rank #2.

New Gold has an expected earnings growth rate of 75% for the current year. The company’s shares have shot up around 92% in the past year. It currently carries a Zacks Rank #2.

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The SherwinWilliams Company (SHW) : Free Stock Analysis Report
 
New Gold Inc. (NGD) : Free Stock Analysis Report
 
Agnico Eagle Mines Limited (AEM) : Free Stock Analysis Report
 
Yamana Gold Inc. (AUY) : Free Stock Analysis Report
 
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