Sherwin-Williams Recalls Paint Cans

The Sherwin-Williams Company (SHW - Analyst Report) has voluntarily recalled 98,400 units of its Krylon-branded acrylic paints citing potential fire hazard to consumers arising from leakage in the aerosol canisters. The consumers have been advised to immediately stop using the recalled products and contact the company for a refund.

The Ohio-based leading paints and coatings maker has recalled 12-ounce cans of its Krylon Triple Thick Crystal Clear Glaze and 11-ounce cans of Krylon Indoor/Outdoor Crystal acrylic paint with clear stain finish. The company noted that it has received 31 reports of leaking paint canisters including cases, which involve property damage. However, no injuries have been reported.

Higher paint sales volume and pricing contributed to a roughly 9% year-over-year surge in Sherwin-Williams’ sales in the second quarter, reported on July 19. Revenues from “The Paint Stores Group,” the company’s largest segment, climbed nearly 15% to $1.49 billion. Sherwin-Williams raised its earnings guidance based on strong sales and increased prices and demand for its Paint Stores Group unit.

Sherwin-Williams’ philosophy is to diversify its customer base and expand its operations into various geographies. The company follows a strategy of growing through acquisitions and also through internal initiatives such as efficient working capital management and innovation.

Despite weak housing markets, the company continues to invest in its core Paint Stores Group to boost market share. An improvement in the market demand in the near term is expected to place Sherwin-Williams in a better position.

However, Sherwin-Williams contends with higher raw material costs, primarily acrylic latex and titanium dioxide (a key paint pigment) in the Consumer Group segment. Moreover, the company faces significant challenge in the second half of 2012 given the weakening market conditions in Europe and Latin America.

Sherwin-Williams, which competes with E. I. du Pont de Nemours and Company (DD - Analyst Report) and PPG Industries Inc. (PPG - Analyst Report), retains a short-term Zacks #2 Rank (Buy). We have a long-term Neutral recommendation on the stock.