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Sherwin-Williams (SHW) Down 4.5% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Sherwin-Williams (SHW - Free Report) . Shares have lost about 4.5% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Sherwin-Williams due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Sherwin-Williams Beats Earnings & Sales Estimates in Q4

Sherwin-Williams logged earnings (as reported) of $4.46 per share in fourth-quarter 2020, up 67.7% from $2.66 in the year-ago quarter.

Barring one-time items, adjusted earnings in the reported quarter were $5.09 per share, which topped the Zacks Consensus Estimate of $4.85.

Sherwin-Williams posted revenues of $4,488.8 million, up 9.1% year over year. The figure also beat the Zacks Consensus Estimate of $4,342.5 million.

Segmental Review

The Americas Group segment registered net sales of $2.58 billion in the fourth quarter, up 9% year over year. The upside was mainly owing to DIY and residential repaint businesses that, which delivered strong double-digit growth, and new residential paint that delivered high-single digit growth.

Net sales in the Consumer Brands Group segment increased 13.6% year over year to $612.8 million. Weak results in Asia business were more than offset by strong North American DIY business.

Net sales in the Performance Coatings Group rose 7.3% year over year to $1.3 billion in the reported quarter. The upside was mainly driven by double-digits growth in coil, industrial wood and packaging businesses. Strong recovery was witnessed in the general industrial business in the quarter, delivering high single digit growth. The automotive business had a more modest growth, as miles driven were dismal.

FY20 Results

Earnings (as reported) for full-year 2020 were $22.08 per share compared with $16.49 per share a year ago. Net sales increased 2.6% to roughly $18.4 billion.

Financials and Shareholder Returns

At the end of the fourth quarter, Sherwin-Williams had cash and cash equivalents of $226.6 million, up 40% year over year. Long-term debt increased 2.7% year over year to $8,266.9 million.

The company purchased 3,900,000 shares of its common stock in 2020.

Outlook

Sherwin-Williams expects demand for North American new residential and residential repaint to remain strong. The commercial end market is expected to stay choppy while the DIY business is likely to face challenging comparisons. The industrial business is expected to be in the best position and industrial demand is forecast to improve moving ahead.

The consolidated net sales for the first quarter of 2021 are projected to increase high single digits compared with prior-year quarter’s levels. For 2021, it is expected to increase mid-to-high single digits. The company expects adjusted earnings per share for 2021 to be between $26.40 and $27.20 compared with $24.58 per share in 2020.
 

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month.

VGM Scores

Currently, Sherwin-Williams has a great Growth Score of A, a grade with the same score on the momentum front. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Sherwin-Williams has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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