On Friday, Evercore ISI adjusted its price target for Sherwin-Williams (NYSE:SHW) shares, reducing it to $350 from the previous $380, while retaining an Outperform rating. The firm anticipates Sherwin-Williams to announce its earnings report on Tuesday, April 23.
The stock has experienced a modest increase of 3% since the fourth-quarter report, which aligns with overall market performance and shows a slight 1% decline year-to-date. This movement suggests a cautious stance on the housing market, despite a positive outlook for the company’s margin growth in 2024.
According to the firm, Sherwin-Williams is expected to continue its low double-digit earnings growth into 2024, aiming to meet the $11.50 earnings per share (EPS) estimate set by Evercore ISI. This growth trajectory is projected to sustain into 2025, potentially bringing EPS closer to $13.
The firm believes that the company’s financial path will become more transparent as indicators in the home improvement sector improve, volumes increase, and gross margins exceed the upper limit of Sherwin-Williams' target range.
The revised $350 price target represents a 30% premium compared to the S&P 500 based on the calendar year 2025 EPS estimates. This premium is in line with historical trends observed during periods of raw material cost deflation.
Evercore ISI also presented a more optimistic scenario, suggesting that if Sherwin-Williams achieves an EPS of $13 or higher, the stock could surpass the $400 mark as operational leverage takes effect, potentially warranting a higher multiple similar to the 60% premium seen in 2011 and 2012.
Sherwin-Williams remains a top pick for Evercore ISI and is included in their "Fab Five" portfolio. The firm endorses the stock as their preferred choice for capitalizing on a recovery in home improvement, specifically targeting professional-oriented, smaller-ticket items in the second half of 2024.
InvestingPro Insights
As Sherwin-Williams (NYSE:SHW) gears up for its upcoming earnings report, investors are keenly observing the company's performance metrics. According to InvestingPro data, Sherwin-Williams boasts a substantial market capitalization of $78.61 billion, reflecting its significant presence in the market. The company's P/E ratio is currently standing at 33.02, which, although high, is indicative of investor confidence in its future earnings potential. Moreover, Sherwin-Williams has demonstrated a solid revenue growth of 4.08% over the last twelve months as of Q1 2023, underscoring its ability to expand in a challenging economic environment.
Among the InvestingPro Tips, two notable highlights for Sherwin-Williams include its consistent track record of dividend growth, with the company raising its dividend for 31 consecutive years, and the fact that management has been aggressively buying back shares. This share repurchase activity signals management's belief in the intrinsic value of the company and their commitment to delivering shareholder value.
For those seeking additional insights and tips, there are 17 more InvestingPro Tips available for Sherwin-Williams, which can be accessed through InvestingPro's comprehensive platform. With these insights, investors can make more informed decisions about their investments in Sherwin-Williams. Remember to use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, enhancing your investment research with valuable data and expert analysis.
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