Back to top

Image: Bigstock

Here's Why You Should Buy Sherwin-Williams (SHW) Right Now

Read MoreHide Full Article

The Sherwin-Williams Company (SHW - Free Report) is benefiting from favorable demand in its domestic end-use markets, focus on growth through expansion of operations and productivity improvement initiatives. The company’s shares have popped roughly 19% over the past three months.

We are positive on the company’s prospects and believe that the time is right for you to add the stock to the portfolio as it looks poised to carry the momentum ahead.

Sherwin-Williams currently carries a Zacks Rank #2 (Buy) and a VGM Score of B. Our research shows that stocks with a VGM Score of A or B, combined with a Zacks Rank #1 (Strong Buy) or 2, offer the best investment opportunities for investors.

Let’s delve deeper into the factors that make this paints and coatings giant an attractive choice for investors right now.

Price Performance

Shares of Sherwin-Williams have rallied 27% over a year against the 25.5% growth of its industry. It has also outperformed the S&P 500’s 16.8% rise over the same period.

 

 

Strong Q2 and Upbeat Outlook

Sherwin-Williams’ earnings (as reported) rose 29% year over year to $6.48 per share in second-quarter 2020. Adjusted earnings of $7.10 per share also topped the Zacks Consensus Estimate of $5.69.

The company expects demand to improve sequentially in the third quarter.  It also raised its net income per share guidance for full-year 2020 to $19.21-$20.71 from its prior view of $16.46-$18.46.

Estimates Going Up

Earnings estimate revisions have the greatest impact on stock prices. Over the past two months, the Zacks Consensus Estimate for Sherwin-Williams for the current year has increased around 15.5%. The consensus estimate for 2021 has also been revised 10.3% upward over the same time frame.

Positive Earnings Surprise History

Sherwin-Williams has outpaced the Zacks Consensus Estimate in three of the trailing four quarters. In this time frame, it has delivered an earnings surprise of 6.6%, on average.

Cash Deployment

The company remains committed to boost returns to its shareholders. It repurchased 1.7 million shares of its common stock in the first half of 2020. Sherwin-Williams, earlier this year, also hiked its quarterly dividend by 18.6% to $1.34 per share. It remains committed to maintain this dividend payout through the balance of 2020.

Growth Drivers in Place

Sherwin-Williams is benefiting from the strength in architectural paint markets in North America. In the second quarter, it witnessed higher demand for architectural DIY (Do It Yourself) paint in North America. The demand strength is expected to continue in the third quarter.

Moreover, Sherwin-Williams  remains committed to expand its retail operations. It is focused on capturing a larger share of its end-markets. The company plans to open around 50 new stores in 2020.

The company is also gaining from synergies of the Valspar acquisition. Its cost-control initiatives, working capital reductions, supply chain optimization and productivity improvement are also yielding margin benefits.

 

Stocks to Consider

Other top-ranked stocks worth considering in the basic materials space include Barrick Gold Corporation (GOLD - Free Report) , Yamana Gold Inc. and Eldorado Gold Corporation (EGO - Free Report) .

Barrick Gold has a projected earnings growth rate of 80.4% for the current year. The company’s shares have gained around 66% in a year. It currently has a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Yamana Gold has a projected earnings growth rate of 76.9% for the current year. The company’s shares have rallied roughly 91% in a year. It currently carries a Zacks Rank #2.

Eldorado Gold has an expected earnings growth rate of 2,215% for the current year. The company’s shares have gained around 39% in the past year. It presently carries a Zacks Rank #2.

Looking for Stocks with Skyrocketing Upside?

Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.      

Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.   

See the pot trades we're targeting>>


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


The Sherwin-Williams Company (SHW) - free report >>

Barrick Gold Corporation (GOLD) - free report >>

Eldorado Gold Corporation (EGO) - free report >>

Published in