Shares of The Sherwin-Williams Company (SHW) touched a new 52-week high of $238.35 on Nov 11, before eventually closing a bit lower at $237.62.
The paint giant, with a market cap of roughly $22.8 billion, has seen its shares rise around 29.5% over the past one year. Its year-to-date return is roughly 30.6%, much higher than the S&P 500’s total return of 12.3%. Average volume of shares traded over the last three months is roughly 554.1K. The company’s long-term projected EPS growth is 13.9%.
What’s Driving SHW Up?
Sherwin-Williams, which is among the leading paint companies along with PPG Industries Inc. (PPG) and Akzo Nobel NV (AKZOY), posted strong third-quarter 2014 results last month on the back of improved operating results in its Paint Stores, Global Finishes and Consumer Groups.
Sherwin-Williams’ earnings rose roughly 31.4% year over year to a record $3.35 per share in the third quarter from $2.55 earned in the year-ago quarter. Its adjusted earnings (barring the acquisition-related impact and currency translation) of $3.39 per share surpassed the Zacks Consensus Estimate of $3.18.
Sherwin-Williams recorded net sales of around $3,150.6 million in the quarter, a 10.6% year-over-year rise. Increased paint sales volumes of Sherwin-Williams’ Paint Stores Group and the favorable impact of acquisitions prompted higher sales in the quarter. Acquisitions contributed 3.3% to the rise in revenues.
Segment-wise, the Paint Stores Group turned in another strong performance in the third quarter. It was also a record quarter in terms of net operating cash generation.
For the fourth quarter, Sherwin-Williams expects its consolidated net sales to increase 6–8% from last year's fourth quarter. For full-year 2014, the company expects consolidated net sales to increase 9–11% from full-year 2013. Sherwin Williams also raised its earnings guidance for 2014 to a range of $8.70–$8.80 per share from $8.50–$8.70, expected previously.
The guidance also assumes that the Comex acquisition will increase net sales by a low single-digit percentage and negatively impact earnings by 28 cents per share in 2014. Moreover, house remodeling activity has picked up and growth is positive year-to-date in both the residential and non-residential markets. Many of the industrial coatings markets too are displaying increasing strength.
Sherwin-Williams is a Zacks Rank #2 (Buy) stock.
Another company in the chemical space worth considering is Celanese Corporation (CE) with a similar Zacks Rank.
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