Sherwin-Williams (SHW) Up 15.1% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Sherwin-Williams (SHW). Shares have added about 15.1% 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 its most recent earnings report in order to get a better handle on the important catalysts.
Sherwin-Williams’ Beats on Q3 Earnings & Sales, Ups View
Sherwin-Williams logged third-quarter 2023 earnings (as reported) of $2.95 per share, up around 12.6% from $2.62 in the year-ago quarter.
Barring one-time items, adjusted earnings in the reported quarter were $3.20 per share, which surpassed the Zacks Consensus Estimate of $2.77.
Sherwin-Williams posted revenues of $6.12 billion, up around 1.1% year over year. The figure surpassed the Zacks Consensus Estimate of $6 billion. The rise was primarily attributable to selling price increases in all segments, which had a low-single-digit percentage impact on sales, as well as a slight net gain from acquisitions and divestitures and positive currency swings. This increase was substantially offset by a low-single-digit volume drop caused mainly by the Consumer Brands and Performance Coatings Groups.
Segmental Review
The Paint Stores Group segment registered net sales of $3.5 billion in the third quarter, up around 3.6% year over year. The figure surpassed our estimate of $3.4 billion. The increase was primarily due to the benefits of higher selling prices, which had a low-single-digit percentage impact on sales.
Net sales in the Consumer Brands Group segment declined 4% year over year to $854.8 million, beating our estimate of $817 million. The decrease was primarily due to the sale of the China architectural business.
Net sales in the Performance Coatings Group declined roughly 1% year over year to $1.7 billion in the reported quarter, beating our estimate of $1.67 billion. The fall was primarily due to volume declines in the high single digits, slightly offset by selling price increases, which improved net sales by a low-single-digit percentage.
Financials
The company delivered $2.6 billion in net operating cash during the first nine months of 2023, a 103% increase over the same period in 2022, owing to higher profit and lower working capital requirements. During the first nine months of 2023, SHW returned $1.41 billion in cash to its shareholders in the form of dividends and repurchases of 3.8 million shares. The company had remaining authorization to buy 41.4 million shares of its common stock through open market purchases as of Sep 30, 2023.
Outlook
The company forecasts its consolidated net sales growth in the fourth quarter of 2023 to be up or down in the low single digits compared to the fourth quarter of 2022. The company raised its net income per share projection for the full-year 2023. It expects full-year net income per share to be in the range of $9.21 to $9.41 per share, up from $8.46-$8.86 expected previously. This includes 80 cents per share in acquisition-related amortization expense and 9 cents per share in net expense linked to the Restructuring Plan. Full-year 2023 adjusted net income per share is now estimated to be in the range of $10.10 to $10.30 per share, up from $9.30 to $9.70 expected earlier.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
VGM Scores
Currently, Sherwin-Williams has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile 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 upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Sherwin-Williams has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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The Sherwin-Williams Company (SHW) : Free Stock Analysis Report
