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Sherwin-Williams (SHW) Up 77% in 6 Months: What's Driving It?

Zacks Equity Research
·4 mins read

The Sherwin-Williams Company's SHW shares have shot up 76.7% over the past six months. The company has also outperformed its industry’s rise of 68.4% over the same time frame.

Sherwin-Williams, a Zacks Rank #2 (Buy) stock, has a market cap of roughly $65.3 billion and average volume of shares traded in the last three months is around 459.1K. The company has an expected long-term earnings per share growth of 9.2%.


Let’s take a look into the factors that are driving this paints and coatings giant.

What’s Going in SHW’s Favor?

Sherwin-Williams is benefiting from favorable demand in its domestic end-use markets, focus on growth through expansion of operations and productivity improvement initiatives.

The company is gaining from the strength in architectural paint markets in North America. In the second quarter, it witnessed higher demand for architectural DIY (Do It Yourself) paint in North America. The demand strength is expected to continue in the third quarter.

The company, in its second-quarter call, said that it expects demand to improve sequentially in the third quarter.  It also raised net income per share guidance for full-year 2020 to $19.21-$20.71 from its prior view of $16.46-$18.46.

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.

Sherwin-Williams also 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.

Earnings estimate revisions also have the greatest impact on stock prices. Over the past two months, the Zacks Consensus Estimate for Sherwin-Williams for the current year has increased around 12%. The consensus estimate for 2021 has also been revised 8.3% upward over the same time frame.

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 stocks worth considering in the basic materials space include AngloGold Ashanti Limited AU, Barrick Gold Corporation GOLD and Eldorado Gold Corporation EGO.

AngloGold Ashanti has a projected earnings growth rate of 124.2% for the current year. The company’s shares have shot up roughly 56% in a year. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Barrick Gold has a projected earnings growth rate of 80.4% for the current year. The company’s shares have rallied around 75% in a year. It currently has a Zacks Rank #1.

Eldorado Gold has an expected earnings growth rate of 2,325% for the current year. The company’s shares have gained around 33% in the past year. It currently carries a Zacks Rank #2.

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