The Sherwin-Williams Company SHW is set to release its first-quarter 2015 results before the opening bell on Apr 16, 2015.
In the last quarter, the coatings and paints company had delivered a positive earnings surprise of 0.74% on the back of improved operating results in its Paint Stores, Global Finishes and Consumer Groups. Let’s see how things are shaping up for this announcement.
Factors to Consider
Looking back at Sherwin-Williams’ fourth-quarter and full-year 2014 results, it can be said that the company exited 2014 with record sales, EBITDA, net income and earnings per share. Moving ahead to 2015, Sherwin-Williams anticipates sustained demand for paints and coatings in most of the markets. Residential constructions gained pace in the fourth quarter of 2014, with contracts for non-residential construction up 7% year over year in 2014. This shows that with housing as well as industrial activity picking up, market demand for paints remains encouraging.
Sherwin-Williams expects consolidated net sales in the first quarter of 2015 to increase in a mid single-digit percentage range year over year. The company anticipates earnings in the band of $1.30–$1.45 per share as against $1.15 per share earned in the first quarter of 2014.
Moreover, for full-year 2015, Sherwin-Williams expects consolidated net sales to rise in a high single-digit percentage range compared with full-year 2014. The company projects net earnings for full-year 2015 in the band of $10.90–$11.10 per share compared with $8.78 per share earned in 2014.
Sherwin-Williams also made a good progress related to the integration of the U.S. and Canadian stores of Comex. The buyout is expected to benefit the company in 2015.
Moreover, Sherwin-Williams announced its architectural paints program at the Lowe’s LOW stores in Dec 2014. The company expects the stores to begin shipping in early spring this year, with the beginning of the painting season.
Earnings Whispers
Our proven model shows that Sherwin-Williams is likely to beat earnings estimates this quarter. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. Sherwin-Williams has the right combination of the two key components.
Zacks ESP: Sherwin-Williams has an Earnings ESP of +0.70% – the difference between the Most Accurate estimate of $1.44 and the Zacks Consensus Estimate of $1.43.
Zacks Rank: Sherwin-Williams carries a Zacks Rank #2 (Buy).
Sherwin-Williams’ Zacks Rank #2 and ESP of +0.70% make us reasonably confident of a positive earnings beat.
We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks that Warrant a Look
Here are some other companies in the basic materials sector you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Cliffs Natural Resources Inc. CLF has an Earnings ESP of +36.84% and a Zacks Rank #3 (Hold).
Agrium Inc. AGU has an Earnings ESP of +36.11% and a Zacks Rank #3.
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