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Sherwin-Williams (SHW) Beats on Q3 Earnings, Lifts FY20 View

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The Sherwin-Williams Company (SHW - Free Report) logged earnings (as reported) of $7.66 per share in third-quarter 2020, up 24.4% from $6.16 in the year-ago quarter.

Barring one-time items, adjusted earnings in the reported quarter were $8.29 per share, which topped the Zacks Consensus Estimate of $7.80.

Sherwin-Williams posted revenues of $5,122.2 million, up 5.2% year over year. The figure also beat the Zacks Consensus Estimate of $5,077.5 million.

The SherwinWilliams Company Price, Consensus and EPS Surprise

The SherwinWilliams Company Price, Consensus and EPS Surprise

The SherwinWilliams Company price-consensus-eps-surprise-chart | The SherwinWilliams Company Quote

Segmental Review

The Americas Group segment registered net sales of $2.98 billion in the third quarter, up 2.8% year over year. The upside was mainly due to higher residential repaint, DIY and new residential paint sales in the United States and Canada, which was partly offset by lower demand in some end market segments stemming from the impacts of the coronavirus pandemic.

Net sales in the Consumer Brands Group segment climbed 23.5% year over year to $838.1 million. The increase can be attributed to higher sales volume in most of the group's retail customers in all regions.

Net sales in the Performance Coatings Group rose 1.2% year over year to $1.31 billion in the reported quarter. The upside was mainly driven by higher sales volume and improving demand in most businesses and regions.

Financials and Shareholder Returns

At the end of the third quarter, Sherwin-Williams had cash and cash equivalents of $619.9 million, up 227% year over year. Long-term debt increased 2.8% year over year to $8,266.9 million.

The company purchased 2,300,000 shares of its common stock in the first nine months of 2020. It had remaining authorization to purchase 6.15 million shares through open market purchases.

Outlook

Sherwin-Williams expects consolidated net sales for the fourth quarter to increase 3-7% year over year. For 2020, it expects net sales to grow by a low single digit percentage. Based on these assumptions, the company raised its 2020 earnings per share (EPS) view to $21.49-$21.79 compared with $16.49 in 2019. Adjusted EPS for 2020 is expected to be between $24 and $24.30.

Price Performance

Shares of Sherwin-Williams have gained 15.9% in the past year compared with the industry’s 16% rise.

Zacks Rank & Other Key Picks

Sherwin-Williams currently carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the Construction space are TopBuild Corp. (BLD - Free Report) , NVR, Inc. (NVR - Free Report) and PulteGroup, Inc. (PHM - Free Report) , all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

TopBuild has an expected earnings growth rate of 17.1% for 2020. Its shares have returned 76% in the past year.

NVR has an expected earnings growth rate of 3.7% for 2020. The company’s shares have gained 10.9% in the past year.

PulteGroup has an expected earnings growth rate of 24.4% for 2020. The company’s shares have surged 7.3% in the past year.

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