Sherwin-Williams (SHW) Up 47% YTD: What's Driving The Rally?

The Sherwin-Williams Company's (NYSE:SHW) shares have surged 47% year to date. The company has also outperformed its industry’s rise of 44% to over the same time frame. Moreover, it has outpaced the S&P 500’s rise of around 24% year to date. The stock is also up around 11% over the past three months.

Sherwin-Williams, a Zacks Rank #3 (Hold) stock, has a market cap of roughly $53.4 billion and average volume of shares traded in the last three months is around 490.1K. The company has an expected long-term earnings per share growth of 11.9%.

Let’s delve deeper into the factors behind the stock’s price appreciation.

Driving Factors

Better-than-expected earnings performance in the last two quarters of 2019 and upbeat outlook for the full year have contributed to the run-up in Sherwin-Williams' shares.

Sherwin-Williams’ adjusted earnings of $6.65 per share for the third quarter outpaced the Zacks Consensus Estimate of $6.46. The paints and coatings giant also raised its adjusted earnings per share guidance for 2019 to the range of $20.90-$21.30. For the full year, Sherwin-Williams expects a low single-digit percentage increase in net sales from 2018.

Earnings estimates for Sherwin-Williams for 2019 have moved up over the past three months. Over this period, the Zacks Consensus Estimate for 2019 has increased by 0.5% to $21.22. The Zacks Consensus Estimate for earnings for 2019 reflects an expected year-over-year growth of 14.5%.

Sherwin-Williams is benefiting from demand strength in the domestic market, its focus on growth through expansion of operations, productivity improvement initiatives and the Valspar acquisition.

The company is gaining from sustained strength in architectural paint markets in North America. Its sales in the third quarter 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.

Sherwin-Williams also remains committed to expand its retail operations. It is focused on capturing a larger share of its end-markets, as reflected by an increasing number of retail stores. The company added 31 net new stores in the first nine months of 2019. Plans are in place to add around 80-100 net new stores in North America by the end of 2019.

The company is also benefiting from synergies of the Valspar acquisition. The buyout has enabled Sherwin-Williams to strengthen its position as a leading paints and coatings provider globally. The company expects to achieve total annual run rate synergies of around $415 million at the end of 2019.

Stocks Worth a Look

A few better-ranked stocks in the construction space include Orion Group Holdings, Inc. (NYSE:ORN) , Gibraltar Industries, Inc. (NASDAQ:ROCK) and MasTec, Inc. (NYSE:MTZ) .

Orion Group Holdings has an expected earnings growth rate of 54.1% for the current year and sports a Zacks Rank #1 (Strong Buy). The company’s shares have gained 25.5% over the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.

Gibraltar Industries has an expected earnings growth rate of 19.2% for the current year and carries a Zacks Rank #1. Its shares have rallied 58.2% in the past year.

MasTec has an expected earnings growth rate of 37.1% for the current year and carries a Zacks Rank #2 (Buy). Its shares have surged 52.4% in the past year.

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