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Why You Should Add Sherwin-Williams (SHW) to Your Portfolio
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The Sherwin-Williams Company (SHW - Free Report) remains committed to growing its retail operations and is witnessing strong demand in domestic markets.
The company currently sports a Zacks Rank #1 (Strong Buy). We are optimistic about its prospects and believe that the time is right to add the stock to your portfolio as it looks poised to carry the momentum ahead.
Let’s take a look into the factors that make Sherwin-Williams an attractive choice for investors right now.
An Outperformer
Shares of Sherwin-Williams have gained 13.5% over the past year, outperforming the 12.8% rise of its industry.
Image Source: Zacks Investment Research
Positive Earnings Surprise History
Sherwin-Williams’ earnings outpaced the Zacks Consensus Estimate in all the trailing four quarters, the average being 11%.
Superior Return on Equity (ROE)
Sherwin-Williams’ ROE of 90% compared with the industry average of 69.5% reflects the company’s efficiency in utilizing shareholders’ funds.
Domestic Demand, Cost Actions Aid SHW
Sherwin-Williams is witnessing strong domestic demand and is expanding its retail business. Demand for auto refinishing has been strong in most areas. So far this year, system installs in North America have climbed by double digits, which is likely to help the company's future sales.
As evidenced by the expanding number of retail stores, the company is focused on acquiring a larger share of its end markets. The Paint Stores Group's sales increased 10% in the second quarter, thanks to higher pricing and volume growth in most end markets. The segment margin grew 280 basis points to 24.3%.
Sherwin-Williams' cost-cutting initiatives, supply chain efficiency, and productivity enhancements are expected to continue boosting margins. Significant efforts to reduce operational costs enabled the company to generate significant net cash flows from operations of roughly $1.9 billion in 2022. In the first six months of 2023, the company returned $848.7 million to shareholders in the form of dividends and share repurchases due to strong cash generation.
The company is also focusing on restructuring, which will provide benefits in 2023. Consumer Brands Group, Performance Coatings Group, and corporate business are the focal areas for this restructuring effort. The company expects to save between $50 million and $70 million per year, with 75% projected to be realized by the end of 2023 and a full run rate by 2024 end.
Sherwin-Williams strengthened its position as the global leader in paints and coatings by acquiring Valspar and using its highly complementary offers, powerful brands and ground-breaking technologies. SHW's brand portfolio and customer base in North America have expanded, and the company's global finish business has been strengthened as a result of this acquisition. The acquisition broadened its global footprint to include Asia-Pacific, Europe, the Middle East, and Africa, as well as additional packaging and coil capabilities.
Other top-ranked stocks in the Constructions space include Boise Cascade Company (BCC - Free Report) , Arcosa Inc. (ACA - Free Report) and Century Communities Inc. (CCS - Free Report) .
Boise Cascade currently sports a Zacks Rank #1. The Zacks Consensus Estimate for BCC’s current-year earnings has been stable over the past 60 days. It has a trailing four-quarter earnings surprise of 19%, on average. The stock has gained 54.8% over the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
Arcosa currently carries a Zacks Rank #2 (Buy). ACA’s earnings surpassed the Zacks Consensus Estimate in all the last four quarters. It has delivered a trailing four-quarter earnings surprise of 59.9%, on average. The stock has rallied 40% over the past year.
Century Communities, currently sporting a Zacks Rank #1, has gained 40.3% over the past year. The company’s earnings beat the Zacks Consensus Estimate in all the last four quarters. CCS has a trailing four-quarter earnings surprise of 31.1%, on average.
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Why You Should Add Sherwin-Williams (SHW) to Your Portfolio
The Sherwin-Williams Company (SHW - Free Report) remains committed to growing its retail operations and is witnessing strong demand in domestic markets.
The company currently sports a Zacks Rank #1 (Strong Buy). We are optimistic about its prospects and believe that the time is right to add the stock to your portfolio as it looks poised to carry the momentum ahead.
Let’s take a look into the factors that make Sherwin-Williams an attractive choice for investors right now.
An Outperformer
Shares of Sherwin-Williams have gained 13.5% over the past year, outperforming the 12.8% rise of its industry.
Image Source: Zacks Investment Research
Positive Earnings Surprise History
Sherwin-Williams’ earnings outpaced the Zacks Consensus Estimate in all the trailing four quarters, the average being 11%.
Superior Return on Equity (ROE)
Sherwin-Williams’ ROE of 90% compared with the industry average of 69.5% reflects the company’s efficiency in utilizing shareholders’ funds.
Domestic Demand, Cost Actions Aid SHW
Sherwin-Williams is witnessing strong domestic demand and is expanding its retail business. Demand for auto refinishing has been strong in most areas. So far this year, system installs in North America have climbed by double digits, which is likely to help the company's future sales.
As evidenced by the expanding number of retail stores, the company is focused on acquiring a larger share of its end markets. The Paint Stores Group's sales increased 10% in the second quarter, thanks to higher pricing and volume growth in most end markets. The segment margin grew 280 basis points to 24.3%.
Sherwin-Williams' cost-cutting initiatives, supply chain efficiency, and productivity enhancements are expected to continue boosting margins. Significant efforts to reduce operational costs enabled the company to generate significant net cash flows from operations of roughly $1.9 billion in 2022. In the first six months of 2023, the company returned $848.7 million to shareholders in the form of dividends and share repurchases due to strong cash generation.
The company is also focusing on restructuring, which will provide benefits in 2023. Consumer Brands Group, Performance Coatings Group, and corporate business are the focal areas for this restructuring effort. The company expects to save between $50 million and $70 million per year, with 75% projected to be realized by the end of 2023 and a full run rate by 2024 end.
Sherwin-Williams strengthened its position as the global leader in paints and coatings by acquiring Valspar and using its highly complementary offers, powerful brands and ground-breaking technologies. SHW's brand portfolio and customer base in North America have expanded, and the company's global finish business has been strengthened as a result of this acquisition. The acquisition broadened its global footprint to include Asia-Pacific, Europe, the Middle East, and Africa, as well as additional packaging and coil capabilities.
The Sherwin-Williams Company Price and Consensus
The Sherwin-Williams Company price-consensus-chart | The Sherwin-Williams Company Quote
Other Stocks to Consider
Other top-ranked stocks in the Constructions space include Boise Cascade Company (BCC - Free Report) , Arcosa Inc. (ACA - Free Report) and Century Communities Inc. (CCS - Free Report) .
Boise Cascade currently sports a Zacks Rank #1. The Zacks Consensus Estimate for BCC’s current-year earnings has been stable over the past 60 days. It has a trailing four-quarter earnings surprise of 19%, on average. The stock has gained 54.8% over the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
Arcosa currently carries a Zacks Rank #2 (Buy). ACA’s earnings surpassed the Zacks Consensus Estimate in all the last four quarters. It has delivered a trailing four-quarter earnings surprise of 59.9%, on average. The stock has rallied 40% over the past year.
Century Communities, currently sporting a Zacks Rank #1, has gained 40.3% over the past year. The company’s earnings beat the Zacks Consensus Estimate in all the last four quarters. CCS has a trailing four-quarter earnings surprise of 31.1%, on average.