On Tuesday, Sherwin-Williams Co. (NYSE:SHW) maintained its Buy rating and a price target of $348.00, as per Goldman Sachs (NYSE:GS). The company reported its first-quarter earnings per share (EPS) of $2.17, which was slightly below the Bloomberg consensus of $2.22 and a modest increase from the previous year's $2.04. Revenue for the quarter was reported at $5.367 billion, down 2.6% from consensus and a 1.4% decrease from the same period last year.
The paint and coatings company confirmed that its full-year guidance remains unchanged, a commitment made during the fourth-quarter release. For the second quarter, Sherwin-Williams expects revenue to be flat to a low single-digit increase.
Segment-wise, the Performance Coatings Group (PCG) is anticipated to have a revenue change ranging from a slight decrease to a slight increase, while the Consumer Brands Group (CBG) is expected to see a low single-digit decrease. The Americas Group (TAG) revenue is projected to grow at a low to mid single-digit rate.
Year-over-year sales for Sherwin-Williams have seen a decline of 1.4% at the lower end of the company's earlier guidance. Same-store sales in the Performance Coatings Group dipped by 0.1%. Since reaching a peak post-COVID in the third quarter of 2022, the quarterly trend has shown a gradual decrease from 20.7% to the current -0.1%.
The company has benefited from lower raw material costs, which contributed to a 2.7% gross margin improvement in the first quarter. Sherwin-Williams also experienced a modest price benefit in the first quarter within the Performance Coatings Group and the Consumer Brands Group. The company anticipates improved pricing in the second quarter as it realizes the full impact of a price increase initiated on February 1st in the Performance Coatings Group.
Despite a flat performance year to date compared to a 4% increase for the Materials Select Sector SPDR Fund (XLB), Sherwin-Williams has been the best-performing U.S. coatings company over the same period. However, based on the slight miss in first-quarter earnings, a more subdued volume outlook, and the high expectations set, Goldman Sachs suggests that Sherwin-Williams shares might trade down relative to its peers today.
InvestingPro Insights
As Sherwin-Williams Co. navigates through market fluctuations and corporate strategies, real-time data from InvestingPro provides a deeper understanding of the company's financial health and stock performance. With a market capitalization of $75.14 billion and a P/E ratio that stands at 33.29, Sherwin-Williams appears to be valued at a premium by the market. This is further underscored by an adjusted P/E ratio for the last twelve months as of Q4 2023 at 31.23 and a PEG ratio of 1.66 for the same period, indicating expectations of future earnings growth relative to the current earnings multiple.
The company's strong commitment to shareholders is evident through two key InvestingPro Tips: Sherwin-Williams has not only raised its dividend for 31 consecutive years but has also maintained dividend payments for an impressive 46 consecutive years. This consistent return to shareholders is a testament to the company's financial stability and long-term growth strategy. Additionally, the company's share repurchase program, as indicated by management's aggressive buyback strategy, reflects confidence in the intrinsic value of the stock.
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