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Sherwin-Williams (SHW) to Post Q4 Earnings: What's in Store?

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The Sherwin-Williams Company (SHW - Free Report) is set to release fourth-quarter 2019 results on Jan 30, before the opening bell.

The company delivered a positive earnings surprise of 2.9% in the last reported quarter. It has beaten the Zacks Consensus Estimate in two of the last four quarters, while missing in the other two. The company has a trailing four-quarter positive earnings surprise of 1.3%, on average.

The company’s fourth-quarter results are expected to reflect benefits from a favorable demand environment in North America. However, soft industrial demand in non-domestic markets might have made a negative impact on the quarterly performance.

Sherwin-Williams’ shares have rallied 47.2% in the past year compared with the industry’s 47.5% growth.



Let’s see how things are shaping up for this announcement.

What to Expect

In October 2019, the company stated that it expects consolidated net sales for the fourth quarter to increase by low single-digit percentage on a year-over-year basis. Sherwin-Williams expects to witness favorable demand and solid backlogs from its North American professional painting contractor customers. The company sees growth in the Americas Group segment to be in mid-to-high single-digit range.

Moreover, the company expects sales in the Consumer Brands Group to be flat-to-up slightly in the to-be-reported quarter. The Performance Coatings Group sales are expected to be down low-single digits due to highly variable industrial demand by region and end market.

For 2019, Sherwin-Williams also raised its adjusted earnings per share guidance in the range of $20.90-$21.30 following strong third-quarter performance. This marks an increase of around 14% at the midpoint compared with adjusted earnings of $18.53 reported in 2018. Notably, the projection excludes costs and non-operating items related to the Valspar acquisition.

The company’s raw material costs likely moderated in the fourth quarter compared with third-quarter levels. This is based on the company’s assumption that there were no supply disruptions and petrochemical feedstocks remained stable.

The company’s fourth-quarter results are also likely to have gained from sustained strength in architectural paint markets in North America. Benefits of cost control and productivity improvement initiatives are also expected to reflect on margin.

However, softer industrial demand in non-domestic markets is likely to have hurt sales in its Performance Coatings Group unit in the fourth quarter.

What do the Estimates Indicate?

The Zacks Consensus Estimate for fourth-quarter total sales for Sherwin-Williams is currently pegged at $4,203 million, which suggests a rise of 3.4% from the year-ago quarter’s figure.

The Zacks Consensus Estimate for net sales in the Americas Group segment is currently pegged at $2,413 million, which suggests expected growth of 7.1% year over year.

The Zacks Consensus Estimate for net sales in the Consumer Brands Group segment is currently pegged at $538 million, which suggests a rise 0.7% from the year-ago quarter’s tally.

The Zacks Consensus Estimate for net sales in the Performance Coatings Group segment is currently pegged at $1,249 million, which calls for a decline of 2% year over year.

The Sherwin-Williams Company Price and EPS Surprise

 

The Sherwin-Williams Company Price and EPS Surprise

The Sherwin-Williams Company price-eps-surprise | The Sherwin-Williams Company Quote

 

What the Zacks Model Says?

Our proven model doesn’t conclusively predict an earnings beat for Sherwin-Williams this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. But that’s not the case here.

Earnings ESP: Earnings ESP for Sherwin-Williams is 0.00%. The Most Accurate Estimate and the Zacks Consensus Estimate are both currently pegged at $4.40. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Sherwin-Williams currently carries a Zacks Rank #3.

Stocks Poised to Beat Estimates

Here are some companies in the basic materials space you may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Bunge Limited BG, slated to release earnings on Feb 12, has an Earnings ESP of +18.18% and sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Cleveland-Cliffs Inc. CLF, scheduled to release earnings on Feb 27, has an Earnings ESP of +6.25% and carries a Zacks Rank #2.

LyondellBasell Industries N.V. LYB, scheduled to release earnings on Jan 31, has an Earnings ESP of +2.83% and carries a Zacks Rank #3.

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