Stock (Symbol) |
Sherwin-Williams (SHW) |
Stock Price |
$311 |
Sector |
| Retail & Travel |
Data is as of |
| February 20, 2017 |
Expected to Report |
| Apr 19 – 24 |
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) killed it in its last earnings report as Architectural paint sales at its stores lead the charge. Same store sales at stores open more than a year jumped an impressive 6%, and the company whipped profit estimates of 4% and delivered a 14% gain in profits. Founded in 1886, Sherwin-Williams has the #1 brand in paint (Sherwin-Williams), stain (Minwax), spray pain (Krylon), auto paint (Dupli-Color) and water sealer (Thompson’s). It’s has a marvelous 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 4180 company stores. The company 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. Sherwin-Williams gets a top safety rating, and has an Est. LTG of 11% per year plus a dividend yield of 1%. Management has raised its dividend every year since 1979, from a penny to $3.66. In 2016, the company agreed to acquire Valspar, and I expect this deal to boost results past expectations as SHW is paying all cash for the fifth largest North American manufacturer of paints and coatings. This deal has halted stock buybacks for now, but I feel the extra profits Valspar will bring aren’t factored in yet. This latest earnings report impressed investors, and caused the stock to jump higher. Sherwin-Williams is a hot stock, and with Trump wanting to boost economic growth, SHW could remain timely for a while. But at $311, the stock is close to my Fair Value of $317. |
One Year Chart |
 Last qtr SHW had sales increase 7% due primarily from better sales from their paint stores. Profit growth was 14% and blew past the 4% estimate. Afterwards, analysts raised NxtQtr’s estimate from 8% to 15%. Overall, profit growth is expected to be 15%, 10%, 6% and 14% the next 4 qtrs. Protective & Marine sales had been hampered by a slow oil drilling industry, and with oil now higher this division could see a pick-up in demand. |
Fair Value |
 SHW earns a high safety and dependability rating, thus its P/E is often 2x its Est. LTG. Th P/E’s pretty much been 23 the last few years and I feel that’s fitting. With the P/E 23 now, the stock’s not undervalued, but there the Total Return estimate for 2018 is 15% which is solid for a conservative stock. |
Bottom Line |
 Sherwin-Williams just completed its 150th year in business, but is still able to grow profits in the double-digits which I find remarkable. Trump’s initiatives could bring a boost to the Global Finishes division, which is around 20% of sales and includes Protective & Marine, Automotive Finishes and Product Finishes (like kitchen cabinets). This stock is timely now, but the recent burst higher has taken away some of the upside potential. SHW ranks 17th in the 30 stock Conservative Growth Portfolio Power Rankings. |
Power Rankings |
Growth Stock Portfolio
N/AAggressive Growth Portfolio N/AConservative Stock Portfolio 17 of 30 |
