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Sherwin-Williams (SHW) to Post Q3 Earnings: What's in Store?

The Sherwin-Williams Company SHW is set to release third-quarter 2021 results on Oct 26, before market open. The company’s performance is expected to reflect strong demand as well as pricing and cost-control initiatives. However, raw material availability issues are likely to have been a headwind.

The company’s earnings beat the Zacks Consensus Estimate in three of the last four quarters, while missing the same once. The company has a trailing four-quarter earnings surprise of 8.7%, on average. It posted a negative earnings surprise of 1.1% in the last reported quarter.

Sherwin-Williams’ shares have gained 34.7% in the past year compared with a 25.8% rally of the industry.

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Let’s see how things are shaping up for this announcement.

What do the Estimates Indicate?

Sherwin-Williams expects third-quarter consolidated net sales to be flat to down modestly from third-quarter 2020 levels.

The Zacks Consensus Estimate for third-quarter total sales is currently pegged at $5,106 million, which reflects a 0.3% decline from the year-ago quarter’s figure.

The consensus estimate for net sales in The Americas Group segment is currently pegged at $2,954 million, which indicates a modest decline of 0.8% year over year.

The Zacks Consensus Estimate for net sales in the Consumer Brands Group segment is currently pegged at $638 million, which suggests a fall of 23.9% from the year-ago quarter’s tally.

The consensus estimate for net sales in the Performance Coatings Group segment is currently at $1,500 million, which calls for a rise of 14.9% year over year.

Some Factors to Watch Out For

Sherwin-Williams is expected to have benefited from favorable demand in domestic markets in the third quarter. It is likely to have witnessed strong architectural sales across professional end markets, driven by continued strength in residential repaint, commercial and property maintenance as well as selling price increases.

The company is likely to have benefited from higher sales in the Performance Coatings Group, driven by healthy sales volumes and pricing actions.

Sherwin-Williams’ cost-control initiatives, working capital reductions, supply chain optimization and productivity improvement are expected to have provided margin benefits in the quarter to be reported.

The company is also focused on capturing a larger share of its end-markets, as evident in the increasing number of retail stores.

However, it is expected to have faced headwind from raw material availability constraints as well as pricing inflation. It anticipates raw material availability issues to hurt its consolidated sales by a high single-digit percentage in the fourth quarter. Raw material pricing is likely to have been high in the quarter.

The Wattyl divestiture might have impacted the company’s sales. The divestment is expected to have hurt sales in the Consumer Brands unit in the quarter.

Zacks Model

Our proven model does not conclusively predict an earnings beat for Sherwin-Williams this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earning beat. But that’s not the case here.

Earnings ESP: Earnings ESP for Sherwin-Williams is 0.00%. The Zacks Consensus Estimate for third-quarter earnings is currently pegged at $2.07. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Sherwin-Williams currently carries a Zacks Rank #4 (Sell). You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks That Warrant a Look

Here are some companies in the basic materials space you may want to consider as our model shows these have the right combination of elements to post an earnings beat this quarter:

Nutrien Ltd. NTR, scheduled to release earnings on Nov 1, has an Earnings ESP of +6.33% and sports a Zacks Rank #1.

The Chemours Company CC, scheduled to release earnings on Nov 4, has an Earnings ESP of +5.70% and carries a Zacks Rank #2.

Albemarle Corporation ALB, scheduled to release earnings on Nov 3, has an Earnings ESP of +8.73% and carries a Zacks Rank #3.

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