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Sherwin-Williams (SHW) Shares Up 21% in 6 Months: Here's Why
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The Sherwin-Williams Company’s (SHW - Free Report) shares have rallied 20.8% over the past six months. The rally has resulted in the stock outperforming its industry’s rise of 19.2% over the same time frame. The company also topped the S&P 500’s roughly 9.9% rise over the same period.
Image Source: Zacks Investment Research
Let’s take a look at the factors that are driving this Zacks Rank #1 (Strong Buy) stock.
What’s Going in Sherwin-Williams’ Favor?
Sherwin-Williams is capitalizing on robust domestic demand and expanding its retail business. It is witnessing strong demand for auto refinishing. The company's North American system installations have surged by double digits this year and bode well for future sales.
With a growing number of retail outlets, Sherwin-Williams is focused on capturing a larger market share. In the second quarter, the Paint Stores Group saw a 10% sales increase, driven by higher pricing and volume growth across various markets. This growth was complemented by segment margin expansion of 280 basis points, reaching 24.3%.
The company's efforts to enhance margins through cost-cutting, supply chain efficiency, and productivity improvements are ongoing. Cost-saving measures led to substantial net cash flows of approximately $1.9 billion in 2022. Strong cash generation facilitated significant shareholder returns, totaling $848.7 million in dividends and share repurchases during the first half of 2023.
Restructuring initiatives are also underway, primarily targeting the Consumer Brands Group, Performance Coatings Group and corporate operations. These efforts are expected to yield savings of $50 million to $70 million annually, with 75% of the projected benefits anticipated by the end of 2023 and a full run rate by the close of 2024.
Sherwin-Williams solidified its position as a global paints and coatings leader through its strategic acquisition of Valspar. Leveraging Valspar's synergistic offerings, strong brands, and innovative technologies, Sherwin-Williams expanded its brand portfolio and customer base in North America. The acquisition additionally bolstered the company's global finish business, extending its reach to Asia-Pacific, Europe, the Middle East, and Africa while also enhancing packaging and coil capabilities.
Furthermore, for full-year 2023, the Zacks Consensus Estimate for earnings currently stands at $9.78 per share, reflecting year-over-year growth of 12%. For 2024, earnings are anticipated to experience growth of 11.5%. The consensus estimate for current-year earnings has been revised upward by 12.4% in the past 60 days.
Also, SHW has consistently surpassed the Zacks Consensus Estimate in each of the past four quarters, with a trailing four-quarter average earnings surprise of 11%.
The earnings estimate for Carpenter Technology’s current year is pegged at $3.36, indicating year-over-year growth of 194%. CRS beat the Zacks Consensus Estimate in all the last four quarters, with the average earnings surprise being 10%. The company’s shares have rallied 61.2% in the past year.
The Zacks Consensus Estimate for Andersons’ current-year earnings has been revised 21.8% upward in the past 60 days. ANDE beat the Zacks Consensus Estimate in the last four quarters. It delivered a trailing four-quarter earnings surprise of 64.4% on average. The company’s shares have risen roughly 26.7% in the past year.
The consensus estimate for Livent’s current-year earnings is pegged at $2.12, indicating year-over-year growth of 51.4%. In the past 60 days, LTHM’s current-year earnings estimate has been revised upward by 3.4%. LTHM beat the Zacks Consensus Estimate in all the last four quarters, with the average earnings surprise being 19%.
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Sherwin-Williams (SHW) Shares Up 21% in 6 Months: Here's Why
The Sherwin-Williams Company’s (SHW - Free Report) shares have rallied 20.8% over the past six months. The rally has resulted in the stock outperforming its industry’s rise of 19.2% over the same time frame. The company also topped the S&P 500’s roughly 9.9% rise over the same period.
Image Source: Zacks Investment Research
Let’s take a look at the factors that are driving this Zacks Rank #1 (Strong Buy) stock.
What’s Going in Sherwin-Williams’ Favor?
Sherwin-Williams is capitalizing on robust domestic demand and expanding its retail business. It is witnessing strong demand for auto refinishing. The company's North American system installations have surged by double digits this year and bode well for future sales.
With a growing number of retail outlets, Sherwin-Williams is focused on capturing a larger market share. In the second quarter, the Paint Stores Group saw a 10% sales increase, driven by higher pricing and volume growth across various markets. This growth was complemented by segment margin expansion of 280 basis points, reaching 24.3%.
The company's efforts to enhance margins through cost-cutting, supply chain efficiency, and productivity improvements are ongoing. Cost-saving measures led to substantial net cash flows of approximately $1.9 billion in 2022. Strong cash generation facilitated significant shareholder returns, totaling $848.7 million in dividends and share repurchases during the first half of 2023.
Restructuring initiatives are also underway, primarily targeting the Consumer Brands Group, Performance Coatings Group and corporate operations. These efforts are expected to yield savings of $50 million to $70 million annually, with 75% of the projected benefits anticipated by the end of 2023 and a full run rate by the close of 2024.
Sherwin-Williams solidified its position as a global paints and coatings leader through its strategic acquisition of Valspar. Leveraging Valspar's synergistic offerings, strong brands, and innovative technologies, Sherwin-Williams expanded its brand portfolio and customer base in North America. The acquisition additionally bolstered the company's global finish business, extending its reach to Asia-Pacific, Europe, the Middle East, and Africa while also enhancing packaging and coil capabilities.
Furthermore, for full-year 2023, the Zacks Consensus Estimate for earnings currently stands at $9.78 per share, reflecting year-over-year growth of 12%. For 2024, earnings are anticipated to experience growth of 11.5%. The consensus estimate for current-year earnings has been revised upward by 12.4% in the past 60 days.
Also, SHW has consistently surpassed the Zacks Consensus Estimate in each of the past four quarters, with a trailing four-quarter average earnings surprise of 11%.
The Sherwin-Williams Company Price and Consensus
The Sherwin-Williams Company price-consensus-chart | The Sherwin-Williams Company Quote
Zacks Rank & Other Key Picks
Some other top-ranked stocks in the Basic Materials space are Carpenter Technology Corporation (CRS - Free Report) and The Andersons, Inc. (ANDE - Free Report) , both sporting a Zacks Rank #1, and Livent Corporation , carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The earnings estimate for Carpenter Technology’s current year is pegged at $3.36, indicating year-over-year growth of 194%. CRS beat the Zacks Consensus Estimate in all the last four quarters, with the average earnings surprise being 10%. The company’s shares have rallied 61.2% in the past year.
The Zacks Consensus Estimate for Andersons’ current-year earnings has been revised 21.8% upward in the past 60 days. ANDE beat the Zacks Consensus Estimate in the last four quarters. It delivered a trailing four-quarter earnings surprise of 64.4% on average. The company’s shares have risen roughly 26.7% in the past year.
The consensus estimate for Livent’s current-year earnings is pegged at $2.12, indicating year-over-year growth of 51.4%. In the past 60 days, LTHM’s current-year earnings estimate has been revised upward by 3.4%. LTHM beat the Zacks Consensus Estimate in all the last four quarters, with the average earnings surprise being 19%.