On Thursday, KeyBanc upgraded Sherwin-Williams (NYSE:SHW) shares, listed on the NYSE under the ticker SHW, from Sector Weight to Overweight, setting a new price target of $400. The upgrade follows a 13% decline in the company's share price since its peak in late March, a contrast to the S&P 500's 3% drop during the same period.
The firm believes that despite a less confident first-quarter performance and increased questions regarding the volume outlook for the year due to higher interest rates, investors should focus on Sherwin-Williams' potential volume recovery in 2025-2026. KeyBanc anticipates that the company will continue to gain market share in the architectural paint sector, aided by a shift from do-it-yourself (DIY) projects to professional contracting.
KeyBanc's outlook for Sherwin-Williams is also buoyed by the housing shortage in the United States, which is expected to disproportionately benefit the company in the new residential market. According to the firm, major macroeconomic indicators such as housing turnover, housing starts, and industrial production are at a trough but are projected to improve.
Despite the recent increase in interest rates, Sherwin-Williams' management has observed continued momentum in home builder sentiment at the start of the second quarter. KeyBanc predicts that the remainder of 2024 will unfold more positively for Sherwin-Williams than the first quarter did.
InvestingPro Insights
Following KeyBanc's optimistic upgrade of Sherwin-Williams (NYSE: SHW), current metrics from InvestingPro offer additional insights. The company's market capitalization stands at a robust $77.18 billion, reflecting its significant presence in the market. With a price-to-earnings (P/E) ratio of 31.85 and a slight adjustment to 31.21 for the last twelve months as of Q1 2024, Sherwin-Williams is trading at a premium, which is indicative of investor confidence in its future earnings potential.
The InvestingPro Tips highlight that Sherwin-Williams has been executing an aggressive share buyback strategy, which can be a sign of management's belief in the company's value. Furthermore, the company's long-standing history of raising its dividend, now for 31 consecutive years, demonstrates a commitment to returning value to shareholders. For readers interested in a deeper dive, there are 17 additional InvestingPro Tips available, which can be accessed with a subscription.
InvestingPro data also shows a modest revenue growth of 1.7% over the last twelve months as of Q1 2024, coupled with a strong gross profit margin of 47.3%. These figures suggest that Sherwin-Williams maintains a healthy profit-making ability despite market fluctuations. Investors looking to make informed decisions may consider these metrics, and to assist, they can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
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