Sherwin-Williams Hits 52-Week High

Shares of Sherwin-Williams Co. (SHW) hit a new 52-week high of $195.72 on Jan 17 and eventually closed at $194.12.

Year-to-date, Sherwin-Williams’ shares have recorded a return of roughly 6%. The company's long-term estimated earnings per share (EPS) growth rate is 14.6%. Average volume of shares traded over the last three months was roughly 666.5K.

Growth Drivers

Sherwin-Williams, which is one of the leading paints companies along with AkzoNobel (AKZOY), posted strong third-quarter 2013 results on the back of healthy gains across its Paint Stores, Consumer and Global Finishes Groups segments. The company’s adjusted earnings (barring one-time items) of $2.68 per share beat the Zacks Consensus Estimate of $2.62. Earnings, inclusive of one-time items, came in at $2.55 per share, up roughly 14% from $2.24 per share a year ago.

Sherwin-Williams posted net sales of $2.85 billion in the quarter, a 9.4% year-over-year rise. It surpassed the Zacks Consensus Estimate of $2.78 billion. The improvement was driven by positive impact of acquisitions and increased paint sales volume of Sherwin-Williams’ Paint Stores Group. In the quarter, acquisitions contributed 1.1% to the increase in consolidated net sales, while currency swings had an unfavorable impact of 0.8%.

The Paint Stores Group posted net sales of $1.76 billion in the third quarter, up 13.5% from the year-ago period. The improvement largely stemmed from the increase in architectural paint sales volume across all end market segments. Net sales of the Consumer Group unit also increased 5.4% year over year to $366.8 million. Net sales of the Global Finishes Group segment also went up 3.2% year over year to $507.3 million in the quarter, as a result of selling price increases and acquisitions.

Sherwin-Williams follows a strategy of growth through acquisitions and internal initiatives such as efficient working capital management and innovation. Its philosophy is to diversify its customer base and expand its operations into various geographies.

Sherwin-Williams continues to invest in its Paint Stores Group segment to boost market share. Its aggressive cost control initiatives, working capital reductions, supply chain optimization and productivity improvement should continue to yield margin benefits. It is also implementing effective pricing strategies to offset higher raw material costs. The company also remains committed to deliver incremental returns to shareholders.

Moreover, the acquisition of the U.S. and Canadian businesses of Consorcio Comex, S.A. de C.V. has ushered in significant opportunities for Sherwin-Williams. The acquisition is a strategic fit for the company and will enable it to serve its customers across some of its key markets better.

For 2013, Sherwin-Williams anticipates that consolidated net sales would increase by a mid-single-digit clip over 2012.

For the fourth quarter, Sherwin-Williams expects consolidated sales to increase 5%–7% year over year. It expects earnings per share in the band of $1.29 to $1.39 for the quarter.

Sherwin-Williams currently carries a Zacks Rank #2 (Buy).

Other Stocks to Consider

Other stocks in the paint industry worth considering include PPG Industries Inc. (PPG) and RPM International Inc. (RPM). All of them hold a Zacks Rank #2 (Buy).