Stock (Symbol) |
Sherwin-Williams (SHW) |
Stock Price |
$391 |
Sector |
| Retail & Travel |
Data is as of |
| November 27, 2017 |
Expected to Report |
| Jan 28 |
Company Description |
 SHW 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 |
 Sherwin-Williams’ (SHW) missed profit estimates last qtr as hurricanes and earthquakes caused stores in Texas, Florida, Georgia, the Caribbean and Mexico to close temporarily. But these natural disasters also mean more paint will be needed to fix these areas up. Although profits grew just 12% last qtr, they are expected to climb an average of 28% the next 4 qtrs. And with a P/E of 22, this stock could go on a run higher in the coming year. Now before we get carried away with the rebuilding aspect, a lot of the anticipated profit growth is because of the acquisition of Valspar last June. SHW is payed all cash for the fifth largest North American manufacturer of paints and coatings, which means profits will flow to the bottom line. 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 4207 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. Still, the yield is only 1%. Sherwin-Williams is a solid core holding in the Conservative Portfolio and I will add it to the Growth Portfolio and Aggressive Growth Portfolio today. I think both conservative and growth mutual fund managers are finding these shares a fit for their portfolios. |
One Year Chart |
 SHW sales jumped 37% due primarily from the Valspar acquisition. Excluding Valspar, sales increased 5% with strength seen in paint stores. Profits grew 12% last qtr and missed estimates of 17%. Afterwards, 2017 estimates dell but 2018’s and 2019’s increased. Qtrly Estimates are for 29%, 34%, 25% and 22% profit growth the next 4 qtrs, which would be outstanding. Before last qtr Sherwin Williams was regularly beating the street. If it gets back to doing that the company could be sporting 30% profit growth for the next year or so. And with a P/E of 22, the stock is nicely priced. |
Fair Value |
 My Fair Value on SHW is 24x earnings, which is really what the stock has been selling for the past 4 years. This stock has good upside when we look out over the next two years. And SHW had been upping profit estimates a lot during the past few years, so these estimates could prove to be conservative. |
Bottom Line |
 Sherwin-Williams just completed its 150th year in business, and to this day continues to grow at a rapid pace due to a strong economy (especially housing) and added profits from Valspar. Bad weather hurt profits last qtr, but rebuild efforts should boost results in the near future. Overall this is one of America’s safest stocks and with profits expected to climb 28% the next 4 qtrs the stock should stay timely. Also, with a P/E of 22 the stock’s undervalued. SHW ranks 2nd in the Conservative Growth Portfolio Power Rankings. I will add it to the Growth Portfolio and Aggressive Growth Portfolio today and it will rank 12th in each portfolio’s Power Rankings. |
Power Rankings |
Growth Stock Portfolio
12 of 38Aggressive Growth Portfolio 12 of 17Conservative Stock Portfolio 2 of 32 |
