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Sherwin-Williams (SHW) Up 5.3% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Sherwin-Williams (SHW - Free Report) . Shares have added about 5.3% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Sherwin-Williams due for a pullback? 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 catalysts.

Sherwin-Williams Earnings & Sales Miss Estimates in Q2

Sherwin-Williams logged earnings (as reported) of $2.42 per share in second-quarter 2021, up 12% from $2.16 in the year-ago quarter.

Barring one-time items, adjusted earnings in the reported quarter were $2.65 per share. The figure missed the Zacks Consensus Estimate of $2.68.

Sherwin-Williams posted revenues of $5,379.8 million, up 16.9% year over year. The figure missed the Zacks Consensus Estimate of $5,384.6 million.

Segmental Review

The Americas Group segment registered net sales of $3,093.4 million in the second quarter, up 22.6% year over year. The upside was mainly owing to higher architectural sales across all professional end markets, driven by residential repaint, commercial and property maintenance as well as selling price increases. This was partly offset by the decrease in DIY as consumer demand returned to more normal levels.

Net sales in the Consumer Brands Group segment declined 25.4% year over year to $731.5 million. The downside was mainly due to lower sales volume to most of the retail consumers and the Wattyl divestiture.

Net sales in the Performance Coatings Group rallied 41.3% year over year to around $1,554.5 million in the reported quarter. The upside was mainly driven by higher sales volumes in all end markets served and higher selling prices.

Financials and Shareholder Returns

At the end of the second quarter, Sherwin-Williams had cash and cash equivalents of $219.6 million, up 16.7% year over year. Long-term debt declined 8.3% year over year to $7,603.8 million.

The company repurchased 6.4 million shares of its common stock in the first six months. It had remaining authorization to repurchase 52.25 million shares through open market purchases at the end of the quarter.

Outlook

The company expects consolidated net sales to increase mid-to-high single digit percentage in the third quarter. For 2021, it is expected to increase high-single to low-double digits. The company also expects adjusted earnings per share for 2021 between $9.15 and $9.45.

 

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -6.01% due to these changes.

VGM Scores

Currently, Sherwin-Williams has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. 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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