On Tuesday, Morgan Stanley (NYSE:MS) reiterated its Overweight rating on Sherwin-Williams (NYSE:SHW) with a steady price target of $338.00. The firm's stance remains positive despite Sherwin-Williams experiencing share price weakness following its softer than anticipated first-quarter results. The recommendation to buy on this weakness is based on a recent survey indicating that the underperformance was largely due to weather-related issues, which Sherwin-Williams also unusually pointed out in its presentation materials.
According to Morgan Stanley's analysis, the demand outlook for Sherwin-Williams remains strong for the remainder of the year. This perspective is supported by the company's own statements, highlighting an encouraging professional architectural demand and sentiment as of April. Additionally, Sherwin-Williams acknowledged that its first-quarter property maintenance sales did not meet expectations, attributing this shortfall to delays in capital expenditure projects, which may be linked to the adverse weather conditions.
The analysis further notes that approximately 2% of same-store sales in the Paint Stores Group (PSG) were expected to shift into the second quarter due to challenging exterior painting conditions. This was evidenced by a record number of reported lost workdays in the survey. However, the impact of these conditions on Sherwin-Williams' performance appears to have been more significant than initially anticipated.
While the first-quarter results were not as strong as expected, Morgan Stanley's outlook is based on the anticipation that these are temporary setbacks. The firm's maintained Overweight rating suggests confidence in Sherwin-Williams' recovery and growth potential as the year progresses, especially as weather-related challenges subside and delayed projects commence.
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