Sherwin-Williams Clocks New 52-Week High at $266.25

Paint giant Sherwin-Williams (SHW) is on a roll as its shares hit yet another 52-week high of $266.25 on Dec 31, before retracing to close the day at $263.04.

The Ohio-based company, which has a market cap of roughly $25.3 billion, has racked up a one-year return of around 45%, much higher than the S&P 500’s corresponding return of roughly 14%. Average volume of shares traded over the last three months is roughly 632.3K. The company’s long-term projected EPS growth is 14.2%.

Driving Factors

Sherwin-Williams, a Zacks Rank #3 (Hold) stock, registered healthy third-quarter 2014 results on Oct 28 with both revenues and profit surging year over year on higher paint sales volumes and contributions from acquisitions. Adjusted earnings topped the Zacks Consensus Estimate.

Sherwin-Williams, last month, revised its earnings per share forecast for 2014, and provided a primary outlook for 2015. The company expects full-year 2014 consolidated net sales to rise around 9% from 2013. At this sales level, the company now sees earnings per share in the range of $8.75–$8.80 versus $8.70–$8.80 it forecasted during the third-quarter call.

For 2015, Sherwin-Williams expects consolidated net sales to rise 7%–11% year over year. At this level, the company expects earnings per share for 2015 in the band of $10.65–$10.85. The outlook factors in the assumption that the recent launch of the HGTV HOME paint solutions will help sales rise by a low single-digit clip and slightly add to earnings per share in 2015.

The launch of HGTV HOME at Lowe’s (LOW) personal stores and on its website Lowes.com represents a part of Sherwin-Williams’ sustained efforts to boost its product portfolio and market footprint through various acquisitions and collaborations.

Sherwin-Williams follows a strategy of growth through acquisitions and internal initiatives such as efficient working capital management and innovation. The acquisition of Comex’s U.S. and Canadian businesses present a significant opportunity for the company.

Moreover, Sherwin-Williams continues to invest in its Paint Stores Group segment to boost market share. It is also implementing effective pricing strategies to offset higher raw material costs. The company should also continue to gain from productivity improvement and aggressive cost-control initiatives.

Other Stocks to Consider

Other companies in the basic materials space worth considering include Innospec Inc. (IOSP) and Valhi, Inc. (VHI). While Innospec holds a Zacks Rank #1 (Strong Buy), Valhi sports a Zacks Rank #2 (Buy).