On Wednesday, BMO Capital Markets adjusted its outlook on Sherwin-Williams (NYSE:SHW) shares, lowering the price target to $377 from $385. The firm, however, is maintaining its Outperform rating on the NYSE-listed company. The revision follows what was characterized as a disappointing first quarter for the paint and coatings manufacturer, influenced by adverse weather conditions and delays in customer projects. These factors, occurring during a typically slow period, overshadowed the initial market share gains Sherwin-Williams experienced due to competitor challenges.
The BMO Capital Markets analyst noted the first-quarter performance as particularly frustrating, especially following a positive non-deal roadshow (NDR). Despite the near-term setbacks, the firm remains optimistic about Sherwin-Williams' full-year 2024 guidance. The analyst predicts that strong pricing strategies, favorable raw material costs, and further market share gains are likely to drive double-digit growth. The firm's outlook is also buoyed by expectations that Sherwin-Williams will benefit from an anticipated improvement in the housing market, which could be stimulated by potential rate cuts in the future.
The firm's analysis suggests that the gains Sherwin-Williams is expected to make in 2024 will significantly enhance the company's performance in the following years, particularly in 2025 and 2026. This projection is based on the premise that the housing market will recover, providing a more favorable backdrop for Sherwin-Williams' business.
Despite the reduction in the price target, BMO Capital Markets reaffirms its positive stance on Sherwin-Williams, citing the company's potential to outperform in the forthcoming fiscal year. The analyst acknowledges the likelihood of near-term volatility, primarily due to interest rate fluctuations, but suggests this does not diminish the long-term growth prospects for the company.
In summary, Sherwin-Williams is positioned to navigate through the current challenging housing market environment, with BMO Capital Markets expressing confidence in the company's strategy and future performance. The firm emphasizes that while the first quarter of 2024 presented some hurdles, the outlook for Sherwin-Williams remains promising.
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