Stock (Symbol)

Sherwin-Williams (SHW)

Stock Price

$242

Sector

Retail & Travel

Data is as of

January 10, 2016

Expected to Report

Jan 28

Company Description

SHW is engaged in the development, manufacture, distribution and sale of paint, coatings and related products. SHW’s segments include Paint Stores Group, Consumer Group, Global Finishes Group and Latin America Coatings Group. The Paint Stores Group markets and sells architectural paint and coatings, protective and marine products, original equipment manufacturer (OEM) product finishes. The Consumer Group develops, manufactures and distributes a range of paint, coatings and related products to third party customers. The Global Finishes Group develops, licenses, manufactures, distributes and sells a range of protective and marine products, automotive finishes and refinished products, and OEM product finishes, among others. The Latin America Coatings Group develops, manufactures, distributes and sells architectural paint and coatings, finishes, among others. Source: Thomson Financial

Sharek’s Take

Sherwin-Williams (SHW) has been rolling since 2012 behind a strong housing market, with profits set to triple in just five years. This is a smooth operation, with an array of positives. The company has the #1 brand in paint (Sherwin-Williams), stain (Minwax), spray pain (Krylon), auto paint (Dupli-Coloe) and water sealer (Thompson’s). It has an end-to-end supply chain with 62 manufacturing sites, 14 distribution centers, 400 trucks and 1200 trailers to get paint and other goods to home improvement centers and 4000 company stores. Sherwin-Williams has strong cash flow due to little capital investment needs, thus management makes acquisitions in addition to stock buybacks that have reduced its share count 30% since 2007. The stock get’s a top safety rating of 1 from Value Line and has raised its dividend 35 consecutive years from a penny in 1980 to $2.68 in 2015. SHW has an estimated long-term growth rate of 18% and at 19x earnings is a solid selection for the Conservative Growth Portfolio. It’s important to note 80% of sales are domestic, so there’s limited foreign exchange risk with the dollar strong.

One Year Chart

Although this one-year chart doesn’t look great, the stock went on a tear from $75 to $290 and was in need of a breather. To me its incredible this large organization is growing so fast. Qtrly profit estimates are for 37%, 17%, 14%, and 15% growth the next 4 qtrs. Two negatives are the company missed profit estimates in two of the last 4 qtrs, but beat the street last qtr. Also, qtrly estimates declined a bit this qtr.

Fair Value

One thing to note is SHW wasn’t able to grow profits during the last recession, and it took until 2012 to get profit growth rolling again. At this time, there are whispers the U.S. may be heading into a slight recession this year, but that’s mainly because energy prices are so low it’s hurting the economic numbers. Consumers have it good as interest rates and gas prices are low.

Bottom Line

Sherwin-Williams is a 150 year old company that’s still growing strong. The company has lots of cash flow to do stock buybacks, acquisitions and pay a dividend that’s increased each year since 1980. The stock also gets a top safety rating, but since its retail it may be punished if the U.S goes into a recession. SHW is in a correction with the stock market in turmoil and I will add it to the Conservative Growth Portfolio, where it will rank 14th of 33 stocks in the Power Rankings.