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Sherwin-Williams (SHW) Shares Up 26% in 6 Months: Here's Why

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The Sherwin-Williams Company’s (SHW - Free Report) shares have popped 26% over the past six months. The paints and coatings giant has also outperformed its industry’s rise of 23.6% over the same time frame. It has also topped the S&P 500’s 19.4% rise over the same period.

Let’s take a look into the factors behind the stock’s price appreciation.


What’s Favoring SHW?

Sherwin-Williams, a Zacks Rank #3 (Hold) stock, is benefiting from the strength in architectural paint markets in North America. It is witnessing higher demand for architectural DIY (Do It Yourself) paint in North America. The company saw strong demand for architectural coatings in the third quarter of 2020, driven by new residential, DIY and residential repaint units.

The company also saw a recovery in its Performance Coatings Group unit in the third quarter on the back of higher sales volume and improved demand in most businesses and regions. This followed a slowdown during the first nine months of 2020 due to weaker end market demand amid the coronavirus pandemic. For Consumer Brands Group segment, the company saw higher sales to most retail customers in all regions.

Moreover, Sherwin-Williams remains committed to expand its retail operations. It is focused on capturing a larger share of its end-markets. The company, in October, said that it plans to add around 55 new stores in the United States and Canada for full-year 2020. Sherwin-Williams 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.

Sherwin-Williams, in its third-quarter call, also said that it 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 view to $21.49-$21.79.

Earnings estimates for Sherwin-Williams have also been going up over the past three months. The Zacks Consensus Estimate for 2021 has increased around 3.3%. The favorable estimate revisions instill investor confidence in the stock. The consensus estimate for earnings for 2021 for Sherwin-Williams is currently pegged at $26.75, reflecting an expected year-over-year growth of 10.1%.



Stocks to Consider

Better-ranked stocks worth considering in the construction space include D.R. Horton, Inc. (DHI - Free Report) , Lennar Corporation (LEN - Free Report) and RPM International Inc. (RPM - Free Report) .

D.R. Horton has an expected earnings growth rate of 25.1% for the current fiscal. The company’s shares have gained around 26% in the past year. It currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Lennar has a projected earnings growth rate of 8.3% for the current fiscal year. The company’s shares have gained around 24% in a year. It currently carries a Zacks Rank #1.

RPM has a projected earnings growth rate of 38.4% for the current fiscal. The company’s shares have gained around 21% in a year. It currently sports a Zacks Rank #2 (Buy).

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