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Sherwin-Williams (SHW) Lags Q4 Earnings, Tops Sales Estimates

Zacks Equity Research

The Sherwin-Williams Company SHW logged net income (as reported) of $1.07 per share for the fourth quarter of 2018, down from $8.92 per share in the year-ago quarter.

Barring one-time items, adjusted earnings for the quarter came in at $3.54 per share, which missed the Zacks Consensus Estimate of $3.56.

Sherwin-Williams posted revenues of $4,064.2 million, up roughly 2.1% year over year. The figure beat the Zacks Consensus Estimate of $4,054.6 million. The upside can be attributed to selling price increases and higher paint sales volume in The Americas Group.

2018 Highlights

The company recorded net sales of $17.5 billion for 2018, up 17% year over year. Earnings declined 35.9% year over year to $11.67 per share.  
 

The Sherwin-Williams Company Price, Consensus and EPS Surprise

 

The Sherwin-Williams Company Price, Consensus and EPS Surprise | The Sherwin-Williams Company Quote

 

Segment Review

The Americas Group unit registered net sales of $2.25 billion in the quarter, up around 3% year over year. Revenues were mainly driven by increased architectural paint sales volume across most end markets and selling price increases.  

Net sales in the Consumer Brands Group unit fell around 6.5% to $534.4 million. Sales in the quarter were affected by lower sales volume of the unit’s retail customers along with the impact of new revenue standard, partly offset by selling price increases and a new customer program.

Net sales in the Performance Coatings Group rose around 4.6% to $1.27 billion in the quarter on the back of selling price increases.
 
Financials and Shareholder Returns

As of Dec 31, 2018, Sherwin-Williams had cash and cash equivalents of $155.5 million, down 23.9% year over year. Long-term debt declined 11.9% to roughly $8.7 billion.

The company purchased 1,525,000 shares of its common stock during the 12-months period of 2018 ended Dec 31. It had remaining authorization to purchase 10.13 million shares through open market purchases.

Outlook

Sherwin-Williams projects net sales to increase 2-6% year over year for first-quarter 2019. The company also noted that first quarter will include expenses related to the defined benefit plan annuity purchase of roughly 43 cents per share.

For 2019, Sherwin-Williams projects core net sales to increase 4-7% year over year. At this level, the company expects earnings in the range of $16.77-$17.77 per share compared with $11.67 in 2018. Notably, full year earnings include non-operating expenses and acquisition-related costs of roughly 43 cents and $3.20 per share, respectively.

Price Performance

Shares of Sherwin-Williams are down 2.8% in the past year compared with the industry’s 1.5% decline.



Zacks Rank and Stocks to Consider

Sherwin-Williams is a Zacks Rank #3 (Hold) stock.

A few better-ranked stocks in the Construction space include Nippon Paint Holdings Co., Ltd. NPCPF, Altair Engineering Inc. ALTR and Lennox International, Inc. LII. While Nippon Paint sports a Zacks Rank #1 (Strong Buy), Altair Engineering and Lennox carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Nippon Paint has an expected earnings growth rate of 44.2% for 2019. Its shares have gained 7.2% in a year’s time.

Altair Engineering has an expected earnings growth rate of 69.8% for 2019. The company’s shares have rallied 21.5% in the past year.

Lennox has an expected earnings growth rate of 31.2% for 2019. Its shares have moved up 2.9% in a year’s time.

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