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Sherwin-Williams (SHW) Lags Q3 Earnings and Revenues
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The Sherwin-Williams Company’s (SHW - Free Report) earnings, excluding costs related to the proposed acquisition of Valspar (VAL - Free Report) and gains from reduction in income tax provision, were $4.23 per share in third-quarter 2016. Adjusted earnings missed the Zacks Consensus Estimate of $4.34. Reported earnings rose to $4.08 per share from $3.97 a year ago.
Improved operating results at the Paint Stores and Global Finishes Groups led to the earnings upside. However, currency translation rate changes reduced earnings by 3 cents per share in the quarter.
Sherwin-Williams, whose well-known brands include Dutch Boy, Minwax and Krylon, recorded net sales of $3,279.5 million in the third quarter, marking a 4% year-over-year rise. Revenues, however, missed the Zacks Consensus Estimate of $3,295 million.
Increased paint sales volumes in Sherwin-Williams’ Paint Stores Group and a change in revenue classification, starting from the third quarter, led to higher sales, partly offset by unfavorable currency translation. Currency swings had an unfavorable effect of 0.8% on consolidated net sales.
The Paint Stores Group unit registered net sales of $2.23 billion in the reported quarter, up 6.7% year over year. The improvement was driven by increased architectural paint sales volume across most end markets. Net store sales from stores open for more than 12 calendar months, rose 2.1% from the prior-year quarter, excluding change in revenue classification.
Net sales of the Consumer Group unit fell 2.1% to $412.9 million, mainly due to lower volume sales to most of the retail and commercial customers. The segment’s profits increased to $92 million from $88.3 million in the prior-year quarter, due to improved operating efficiency, partly offset by lower sales.
Net sales from the Global Finishes Group segment dropped 1.1% to $480.7 million in the quarter, mainly due to unfavorable currency impact that hurt sales by 1.5%. Segment profits improved year over year, owing to a fall in costs of raw materials and good cost control, which were partly offset by unfavorable currency translation.
The Latin America Coatings Group’s net sales improved 0.4% to $156.6 million, mainly due to an increase in selling price, partly offset by unfavorable currency translation and less volume. Unfavorable currency translation affected sales by 8.2% in the quarter. Segment profit decreased owing to higher raw material costs and an unfavorable currency translation rate, partly offset by higher selling price.
Financials and Shareholder Returns
Sherwin-Williams made no open market purchases of its common stock in the nine-month period ended Sep 30, 2016. As of Sep 30, 2016, the company had $702.6 million cash in hand that will be used to finance the Valspar acquisition.
Outlook
Sherwin-Williams projects a low single-digit percentage increase in net sales year over year for fourth-quarter 2016. The company expects earnings per share in the fourth quarter to be in the range of $1.45–$1.55, compared to $2.12 earned in the fourth quarter of 2015. Fourth-quarter earnings per share include costs related to the planned acquisition of Valspar of around 71 cents per share and an increase in earnings per share of about 3 cents related to the decrease in income tax provision.
For 2016, the company expects consolidated net sales to increase by a low single-digit clip compared with 2015. Management revised its earnings per share guidance for 2016 to the range of $11.30–$11.40 from $11.65−$11.85 per share guided earlier. In 2015, the company had recorded earnings of $11.16 per share. Full-year 2016 earnings per share guidance includes costs related to the planned acquisition of Valspar of around $1.35 cents per share and an increase in earnings per share of about 40 cents related to the decrease in income tax provision.
Sherwin-Williams currently sports a Zacks Rank #1 (Strong Buy).
Some other well-ranked companies in the basic materials space include The Chemours Company (CC - Free Report) and RPM International Inc. (RPM - Free Report) .
RPM International, a Zacks Rank #2 (Buy) stock, has an expected long-term growth of 8.00%.
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Sherwin-Williams (SHW) Lags Q3 Earnings and Revenues
The Sherwin-Williams Company’s (SHW - Free Report) earnings, excluding costs related to the proposed acquisition of Valspar (VAL - Free Report) and gains from reduction in income tax provision, were $4.23 per share in third-quarter 2016. Adjusted earnings missed the Zacks Consensus Estimate of $4.34. Reported earnings rose to $4.08 per share from $3.97 a year ago.
Improved operating results at the Paint Stores and Global Finishes Groups led to the earnings upside. However, currency translation rate changes reduced earnings by 3 cents per share in the quarter.
Sherwin-Williams, whose well-known brands include Dutch Boy, Minwax and Krylon, recorded net sales of $3,279.5 million in the third quarter, marking a 4% year-over-year rise. Revenues, however, missed the Zacks Consensus Estimate of $3,295 million.
Increased paint sales volumes in Sherwin-Williams’ Paint Stores Group and a change in revenue classification, starting from the third quarter, led to higher sales, partly offset by unfavorable currency translation. Currency swings had an unfavorable effect of 0.8% on consolidated net sales.
Segment Review
The Paint Stores Group unit registered net sales of $2.23 billion in the reported quarter, up 6.7% year over year. The improvement was driven by increased architectural paint sales volume across most end markets. Net store sales from stores open for more than 12 calendar months, rose 2.1% from the prior-year quarter, excluding change in revenue classification.
Net sales of the Consumer Group unit fell 2.1% to $412.9 million, mainly due to lower volume sales to most of the retail and commercial customers. The segment’s profits increased to $92 million from $88.3 million in the prior-year quarter, due to improved operating efficiency, partly offset by lower sales.
Net sales from the Global Finishes Group segment dropped 1.1% to $480.7 million in the quarter, mainly due to unfavorable currency impact that hurt sales by 1.5%. Segment profits improved year over year, owing to a fall in costs of raw materials and good cost control, which were partly offset by unfavorable currency translation.
The Latin America Coatings Group’s net sales improved 0.4% to $156.6 million, mainly due to an increase in selling price, partly offset by unfavorable currency translation and less volume. Unfavorable currency translation affected sales by 8.2% in the quarter. Segment profit decreased owing to higher raw material costs and an unfavorable currency translation rate, partly offset by higher selling price.
Financials and Shareholder Returns
Sherwin-Williams made no open market purchases of its common stock in the nine-month period ended Sep 30, 2016. As of Sep 30, 2016, the company had $702.6 million cash in hand that will be used to finance the Valspar acquisition.
Outlook
Sherwin-Williams projects a low single-digit percentage increase in net sales year over year for fourth-quarter 2016. The company expects earnings per share in the fourth quarter to be in the range of $1.45–$1.55, compared to $2.12 earned in the fourth quarter of 2015. Fourth-quarter earnings per share include costs related to the planned acquisition of Valspar of around 71 cents per share and an increase in earnings per share of about 3 cents related to the decrease in income tax provision.
For 2016, the company expects consolidated net sales to increase by a low single-digit clip compared with 2015. Management revised its earnings per share guidance for 2016 to the range of $11.30–$11.40 from $11.65−$11.85 per share guided earlier. In 2015, the company had recorded earnings of $11.16 per share. Full-year 2016 earnings per share guidance includes costs related to the planned acquisition of Valspar of around $1.35 cents per share and an increase in earnings per share of about 40 cents related to the decrease in income tax provision.
SHERWIN WILLIAM Price, Consensus and EPS Surprise
SHERWIN WILLIAM Price, Consensus and EPS Surprise | SHERWIN WILLIAM Quote
Zacks Rank
Sherwin-Williams currently sports a Zacks Rank #1 (Strong Buy).
Some other well-ranked companies in the basic materials space include The Chemours Company (CC - Free Report) and RPM International Inc. (RPM - Free Report) .
Chemours, with an expected long-term growth of 15.50%, sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
RPM International, a Zacks Rank #2 (Buy) stock, has an expected long-term growth of 8.00%.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>