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Sherwin-Williams (SHW) Down 5.1% 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 5.1% 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 catalysts.

Sherwin-Williams Beats Earnings & Sales Estimates in Q1

Sherwin-Williams logged earnings (as reported) of $1.41 per share in first-quarter 2022, down 6.6% from $1.51 in the year-ago quarter.

Barring one-time items, adjusted earnings in the reported quarter were $1.61 per share, which topped the Zacks Consensus Estimate of $1.54.

Sherwin-Williams posted revenues of $4,998.7 million, up 7.4% year over year. The figure also beat the Zacks Consensus Estimate of $4,877.7 million.

Segmental Review

The Americas Group segment registered net sales of $2.6 billion in the first quarter, up 5.6% year over year. The upside was mainly owing to sales increases in all professional contractor end markets.
Net sales in the Consumer Brands Group segment decreased 10.1% year over year to $699.4 million. The decrease in sales was led by lower sales outside North America and the Wattyl divestiture.

Net sales in the Performance Coatings Group rose 20.4% year over year to around $1.7 billion in the reported quarter. The upside was mainly driven by higher sales in all end markets, served led by higher selling prices and sales volume growth in the company’s Packaging and Coil businesses.

Financials and Shareholder Returns

At the end of the first quarter, Sherwin-Williams had cash and cash equivalents of $401.1 million, up 27.5% year over year. Long-term debt increased 9.3% year over year to $8,592.3 million.

The company repurchased 1.45 million shares of its common stock in the first quarter. It had remaining authorization to repurchase 47.1 million shares through open market purchases at the end of the quarter.

Outlook

The company expects consolidated net sales to increase low-double digit to mid teens percentage year over year in the second quarter. For 2022, it is expected to increase high-single digit to low-double digit percentage. The company also expects adjusted earnings per share for 2022 to be between $9.25 and $9.65.

 

 

How Have Estimates Been Moving Since Then?

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

VGM Scores

Currently, Sherwin-Williams has a subpar Growth Score of D, a grade with the same score on the momentum front. 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been 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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