Sherwin Williams Moves into Prime Painting Season

Stock (Symbol)

Sherwin-Williams (SHW)

Stock Price


Retail & Travel
Data is as of
May 30, 2017
Expected to Report
Jul 19
Company Description
sherwinwilliams_insideSHW is engaged in the development, manufacture, distribution and sale of paint, coatings and related products. The Paint Stores Group markets and sells architectural paint and coatings, protective and marine products, original equipment manufacturer (OEM) product finishes. The Consumer Group distributes a range of paint, coatings and related products to third party customers. The Global Finishes Group distributes a range of protective and marine products and automotive finishes. Source: Thomson Financial
Sharek’s Take
David SharekSherwin-Williams’ (SHW) moves into painting season with good momentum, as the company is experiencing improving demand in industrial products and the professional painter market, while the U.S. do-it-yourself market lags. 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 pays a dividend, makes acquisitions, and has made stock buybacks that reduced its share count 30% since 2007. Management has raised its dividend every year since 1979, from a penny to $3.40. On June 1st the company acquired 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. The company has temporarily suspended stock buybacks as it builds cash for this big buy. Sherwin-Williams is expected to grow profits 13% this year, pays a dividend yield of 1%, and has a P/E of 24. The P/E is high when compared to the Est. LTG of 11% per year but the company has been growing faster than that. Plus, this is a solid Blue Chip stock that’s grown 17% a year the past decade, and this kind of quality deserves a premium price. 
One Year Chart
Last qtr SHW had sales increase 7% as sales from their paint stores grew 12% (their paint stores doing well is a recurring theme). Profit growth was 25% and blew past estimates of 15% growth. Analysts raised 2017, 2018 and 2019 estimates. Qtrly profit growth is expected to clock in at 12%, 6% and 11% and 15% the next 4 qtrs (that’s 11% on avg, which matches the Est. LTG).
Fair Value
SHW is selling for 24x earnings, which is in line with my Fair Value. Annual estimates have increased the past two qtrs, but they came down the two qtrs prior to that. I do feel estimates will be bumped up with the Valspar now complete.
Bottom Line
Sherwin-Williams just completed its 150th year in business, but is still able to grow profits in the double-digits which is remarkable. The economy remains strong — as does construction — and those will be winds to the sails of business. But the big boost might be from Valspar delivering extra profits. This stock is timely now, but fairly valued. SHW ranks 9th in the 34 stock Conservative Growth Portfolio Power Rankings.
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