Sherwin-Williams' (SHW) Q3 Earnings, Sales Top Estimates

The Sherwin-Williams Company (NYSE:SHW) logged earnings (as reported) of $6.16 per share in the third quarter of 2019, up around 66% from $3.72 a year ago.

Barring one-time items, adjusted earnings for the quarter came in at $6.65 per share, which surpassed the Zacks Consensus Estimate of $6.46.

Sherwin-Williams posted revenues of $4,867.7 million, up around 3% year over year. The figure also beat the Zacks Consensus Estimate of $4,819.8 million. The company gained from sustained strength in architectural paint markets in North America.

Sales were driven by increased paint sales volume in North American stores and higher selling prices that more than offset weak demand across certain end-markets outside the United States. Unfavorable currency translation reduced sales by 0.9%.

Segment Review

The Americas Group segment registered net sales of $2.9 billion in the quarter, up around 9% year over year. Revenues were mainly driven by higher paint sales across all end markets in North American stores along with higher selling prices.

Net sales in the Consumer Brands Group segment fell around 12% to $678.5 million. The decline is partly due to the divestiture of the Guardsman furniture protection business and weaker sales in specific markets outside of North America. The company, however, saw higher selling prices and increased sales volume related to most of the Group's retail customers.

Net sales in the Performance Coatings Group ticked down 0.3% to roughly $1.3 billion in the quarter. The decline was mainly caused by softness in sales outside North America and unfavorable currency translation effect, partly offset by higher selling prices.

Financials and Shareholder Returns

Sherwin-Williams had cash of $189.6 million at the end of the quarter, up around 5% year over year. Long-term debt declined around 8% year over year to roughly $8 billion.

The company purchased 1,325,000 shares of its common stock during the first nine months. It had remaining authorization to purchase 8.8 million shares through open market purchases.

Outlook

Sherwin-Williams projects low single digit percentage increase in net sales year over year for fourth-quarter 2019. For the full year, Sherwin-Williams expects low single digit percentage increase in net sales from 2018. The company now expects earnings in the range of $17.07-$17.47 per share for 2019 (compared with $11.67 in 2018).

The company also raised its adjusted earnings per share guidance for 2019 to the range of $20.90-$21.30.

Price Performance

Shares of Sherwin-Williams have rallied 39.8% year to date compared with the industry’s 38.7% rise.

Zacks Rank & Key Picks

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

Better-ranked stocks worth a look in the basic materials space include Agnico Eagle Mines Limited (NYSE:AEM) , Kinross Gold Corporation (NYSE:KGC) and Franco-Nevada Corporation (TSX:FNV) , all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Agnico Eagle has a projected earnings growth rate of 158.6% for the current year. The company’s shares have rallied 43% in a year’s time.

Kinross has projected earnings growth rate of 170% for the current year. The company’s shares have surged around 61% in a year’s time.

Franco-Nevada has estimated earnings growth rate of 35.9% for the current year. The company’s shares have gained roughly 43% in a year’s time.

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