Sherwin-Williams (SHW) Q2 Earnings Top, Sales Miss Estimates

The Sherwin-Williams Company (NYSE:SHW) logged earnings (as reported) of $5.03 per share in the second quarter of 2019, up 18.4% from $4.25 a year ago.

Barring one-time items, adjusted earnings for the quarter came in at $6.57 per share, which beat the Zacks Consensus Estimate of $6.35.

Sherwin-Williams posted revenues of $4,877.9 million, up around 2.2% year over year. However, the figure trailed the Zacks Consensus Estimate of $4,924.7 million.

Segment Review

The Americas Group segment registered net sales of $2.76 billion in the quarter, up around 5% year over year. Revenues were mainly driven by higher paint sales volume across all end markets in North American stores along with higher selling price that more than offset the impact of unfavorable currency.

Net sales in the Consumer Brands Group segment rose around 3.4% to $804.5 million. The upside can be attributed to a new customer program initiated in 2018 and higher selling prices. However, it was partly offset by the divestiture of the Guardsman furniture protection business in third-quarter 2018, unfavorable currency translation impacts and lower sales volume related to some of the Group's retail customers.

Net sales in the Performance Coatings Group fell 3.8% to $1.32 billion in the quarter. The decline was mainly caused by softness in sales outside North America and unfavorable currency translation effect, partly offset by selling price increases.

Financials and Shareholder Returns

Sherwin-Williams had cash of $145.6 million at the end of the quarter, down around 6.1% year over year. Long-term debt declined 25.9% year over year to roughly $7.2 billion.

The company purchased 1,075,000 shares of its common stock during the first six months. It had remaining authorization to purchase 9.05 million shares through open market purchases.

Outlook

The company reaffirmed adjusted earnings per share guidance in the range of $20.40-$21.40 for 2019.

Sherwin-Williams projects low single digit percentage increase in net sales year over year for third-quarter 2019. For the full year, Sherwin-Williams expects 2-4% increase in net sales from 2018. The company now expects earnings in the range of $16.14-$17.14 per share for 2019 (compared with $11.67 in 2018) factoring in the charges related to tax credit investment loss.

Price Performance

Shares of Sherwin-Williams have moved up 5.8% in the past year compared with the industry’s 5.6% rise.

Zacks Rank & Key Picks

Sherwin-Williams currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the basic materials space are SSR Mining Inc (NASDAQ:SSRM) , Kinross Gold Corporation (NYSE:KGC) and Rio Tinto (LON:RIO) plc (NYSE:RIO) , all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

SSR Mining has an expected earnings growth rate of 69.6% for 2019. The company’s shares have rallied 56% in the past year.

Kinross has projected earnings growth rate of 80% for the current year. The company’s shares have gained 16.5% in a year’s time.

Rio Tinto has an estimated earnings growth rate of 34.3% for the current year. Its shares have moved up 12.9% in the past year.

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