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Sherwin-Williams (SHW) Lags Q1 Earnings & Sales Estimates

The Sherwin-Williams Company SHW logged net income (as reported) of $2.62 per share for the first quarter of 2019, flat year over year.

Barring one-time items, adjusted earnings for the quarter came in at $3.60 per share, which missed the Zacks Consensus Estimate of $3.63.

Sherwin-Williams posted first-quarter revenues of $4,040.9 million, up around 2% year over year. It trailed the Zacks Consensus Estimate of $4,080.4 million.

The top-line growth was driven by a new customer program launched last year, increased paint sales volume in North American stores and higher selling prices, partly masked by weak demand outside of the United States and unfavorable currency swings.

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 $2.15 billion in the quarter, up around 4% year over year. Revenues were mainly driven by higher paint sales volume across most end markets in North American stores and increased selling prices that more than offset unfavorable currency impact.

Net sales in the Consumer Brands Group unit fell around 0.3% to $654.5 million. Sales in the quarter were affected by weak non-domestic market conditions, the divestment of the Guardsman furniture protection business and unfavorable currency impact. This was, in part, offset by a new customer program and higher selling prices.

Net sales in the Performance Coatings Group inched up 0.2% to $1.23 billion in the quarter mainly on the back of selling price increases.
 
Financials and Shareholder Returns

Sherwin-Williams had cash of $94.4 million at the end of the quarter, down around 40% year over year. Long-term debt declined 12% to roughly $8.7 billion.

The company purchased 750,000 shares of its common stock during the quarter. It had remaining authorization to purchase 9.38 million shares through open market purchases.

Outlook

The company reaffirmed its adjusted earnings per share guidance of $20.40- $21.40 for 2019.

Sherwin-Williams projects 2-5% increase in net sales year over year for second-quarter 2019. For 2019, Sherwin-Williams expects 4-7% increase in net sales from 2018. The company now expects earnings in the range of $16.93-$17.93 per share for 2019 (compared with $11.67 in 2018) factoring in lower than expected pension settlement expense.

Price Performance

Shares of Sherwin-Williams are up 14.8% year to date compared with the industry’s 13% rise.



 

Zacks Rank & Key Picks

Sherwin-Williams currently carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the construction space include AAON, Inc. AAON, Comfort Systems USA, Inc. FIX and Trex Company, Inc. TREX.

AAON has an expected earnings growth rate of 61.7% for the current year and carries a Zacks Rank #1 (Strong Buy). The company’s shares have gained around 32% over the past year.  You can see the complete list of today’s Zacks #1 Rank stocks here.

Comfort Systems has an expected earnings growth rate of 11.7% for the current year and carries a Zacks Rank #2 (Buy). Its shares have rallied roughly 36% in the past year.

Trex has an expected earnings growth rate of 8.1% for the current year and carries a Zacks Rank #2. Its shares have shot up around 42% in the past year.

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