Sherwin-Williams Moves Up On Strong Results
The institutions haven’t been doing much of anything with The Sherwin-Willams Company (NYSE: SHW) stock recently but that’s recently. Over the past 4 quarters, specifically in the 2nd quarter of 2021, the institutions bought quite a lot of the stock and put a floor in the share prices. That floor was confirmed today after the company reported its Q1 earnings and that should lead to higher share prices. The institutions, by the way, own more than 76% of the stock and bought most of that in the 2nd quarter of 2021. Since then, there has been a little bit of buying and selling but it looks like rotation and nothing more. Based on the Q1 results, we think the institutions will start buying again and help drive share prices back to record levels.
The analysts will probably aid the move higher as well. There haven’t been any commentaries since the Q1 release but they are coming. Until then, there are 20 analysts rating the stock a weak Buy with a consensus price target more than 20% above the current price action. The consensus is down in the 90 and 30-day comparisons, however, but that trend should end now that the results are out. The high price target, on the other hand, is another 20% above the consensus and would be a new all-time high when reached.
The Sherwin-Williams Company Provides A Positive Outlook
The Sherwin-Williams Company not only had a better than expected quarter but was able to give a positive outlook as well. That outlook includes “meaningful improvement” in material availability that should result in both increased sales and moderating input costs. Until then, the $5 billion in net revenue is up 7.3% versus last year and last year's sales were up double digits. The revenue was also 162 basis points above the Insidertrades.com consensus and driven by strength in all end markets. On a comp basis, North American comps are up 3.8% and 5.6% net. On a segment basis, Consumer Brands are down 10.19% versus last year's tough comp, and the Performance Coatings Group is up 20.4%. Both segments were supported by pricing increases the company says have not taken full effect.
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Moving down to the earnings, the company reported a decline in the margin but only 170 basis points at the EBIT level. This left adjusted earnings at $1.61 and $0.08 better than expected although down on a YOY basis. The really good news is that pricing increases are still working their way through the system and, when combined with underlying demand strength, led management to raise the guidance. The company is now expecting revenue growth in the low teens for Q2 and the high teens for the year with EPS of $9.25 to $9.66 versus the consensus of $9.33.
"Our team delivered results in line with our expectations in an environment characterized by strong demand, ongoing cost inflation, and choppy raw material availability that improved meaningfully in the final weeks of the quarter," said Chairman and Chief Executive Officer, John G. Morikis. "Sales grew 7.4% against a double-digit comparison a year ago, and we delivered sequential improvement in consolidated gross margin and segment margins in all of our businesses. Our margins remained under pressure on a year-over-year basis, as significant pricing actions previously announced in all businesses have not yet fully caught up to offset highly elevated raw material costs.
The Technical Outlook: The Sherwin-Willams Company Confirms Reversal
Shares of The Sherwin-Williams Company corrected earlier this year but the bottom is in. Price action gained more than 10% in the wake of the Q1 results and is confirming a bottom at the $235 level. The indicators are rolling into a strong buy signal as well, so we are expecting to see a retest of the $300 level if not a move up to the all-time highs.
Companies in This Article:
| Company | Current Price | Price Change | Dividend Yield | P/E Ratio | Consensus Rating | Consensus Price Target |
|---|
| Sherwin-Williams (SHW) | $305.96 | -1.1% | 0.93% | 33.08 | Moderate Buy | $325.94 |
Experience
Thomas Hughes has been a contributing writer for InsiderTrades.com since 2019.
Areas of Expertise
Technical analysis, the S&P 500; retail, consumer, consumer staples, dividends, high-yield, small caps, technology, economic data, oil, cryptocurrencies
Education
Associate of Arts in Culinary Technology
Past Experience
Market watcher, trader and investor for numerous websites. Founded Passive Market Intelligence LLC to provide market research insights.
