Why You Should Add Sherwin-Williams (SHW) to Your Portfolio
The Sherwin-Williams Company SHW remains committed to growing its retail operations and is witnessing strong demand in domestic markets.
The company currently carries a Zacks Rank #2 (Buy). We are optimistic about its prospects and believe that the time is right to add the stock to your portfolio as it looks poised to carry the momentum ahead.
Let’s take a look into the factors that make Sherwin-Williams an attractive choice for investors right now.
An Outperformer
Shares of Sherwin-Williams have gained 26.1% over the past year, outperforming the 24.9% rise of its industry.
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Positive Earnings Surprise History
Sherwin-Williams’ earnings outpaced the Zacks Consensus Estimate in each of the trailing four quarters, the average being 12.63%.
Superior Return on Equity (ROE)
Sherwin-Williams’ ROE of 90% compared with the industry average of 66.5% reflects the company’s efficiency in utilizing shareholders’ funds.
Domestic Demand, Cost Actions & Acquisitions Aid SHW
Sherwin-Williams is growing its retail operation in response to strong domestic demand. The demand for auto refinishing is stable, with sales increasing by a mid-single-digit percentage in the third quarter. The company continues to focus on securing a larger proportion of its end markets, as indicated by the growing number of retail stores.
Paint Stores Group added 36 net new stores in the first nine months of 2023, including 16 in the third quarter. Paint Stores Group sales rose 3.6% in the third quarter due to continued efficient pricing. The segment margin grew by 420 basis points to 25.9%.
Sherwin-Williams' cost-cutting initiatives, supply chain efficiency and productivity gains should continue to yield margin benefits. Efforts to lower operational expenses enabled the corporation to generate $1.9 billion in net cash flows from operations in 2022. Furthermore, the company's robust cash generation allowed it to return $1.41 billion to shareholders in dividends and share repurchases during the first nine months of 2023.
Sherwin-Williams reinforced its position as the global leader in paints and coatings by acquiring Valspar and exploiting its highly complementary capabilities, powerful brands and ground-breaking technology. SHW's brand portfolio and client base in North America have expanded as a result of this acquisition, and the company's global finish business has strengthened. With the acquisition, the company's global footprint expanded to cover Asia-Pacific, Europe, the Middle East and Africa, as well as new packaging and coil capabilities.
The company, on its third-quarter call, raised its net income per share expectation for fiscal 2023. It anticipates full-year net income per share of $9.21 to $9.41, up from $8.46-$8.86 previously predicted. This comprises a net expense of 9 cents per share owing to the Restructuring Plan and an acquisition-related amortization expense of 80 cents per share. Full-year 2023 adjusted net income per share is now estimated to be in the $10.10 to $10.3 range, up from $9.30 to $9.70 expected previously.
The Sherwin-Williams Company Price and Consensus
The Sherwin-Williams Company price-consensus-chart | The Sherwin-Williams Company Quote
Other Stocks to Consider
Other top-ranked stocks in the Constructions space include Dream Finders Homes Inc. DFH, EMCOR Group Inc. EME and Fluor Corporation FLR.
Dream Finders currently sports a Zacks Rank #1 (Strong Buy). The Zacks Consensus Estimate for DFH’s current-year earnings has been rising over the past 60 days. It delivered a trailing four-quarter earnings surprise of 131.6%, on average. The stock has gained 275.3% over the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
EMCOR currently carries a Zacks Rank #1. EME’s earnings surpassed the Zacks Consensus Estimate in each of the last four quarters. It delivered a trailing four-quarter earnings surprise of 24.9%, on average. The stock has rallied 44% over the past year.
Fluor currently sports a Zacks Rank #1. The Zacks Consensus Estimate for FLR’s current-year earnings has been rising over the past 60 days. It delivered a trailing four-quarter earnings surprise of 37.5%, on average. The stock has gained 10.4% over the past year.
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