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Why Sherwin-Williams’s 1Q18 Revenue Could Be Set to Rise



Sherwin-Williams’ 1Q18 revenue estimates

Sherwin-Williams is expected to report revenue of $4.0 billion in 1Q18, a 43.1% increase from 1Q17’s $2.8 billion. If SHW manages to meet expectations, it will achieve its highest first-quarter revenue ever and have a first-quarter CAGR (compound annual growth rate) of 12.8% since 2013. During this period, the company’s revenues have grown every year.

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Driving factors

SHW’s projected revenue growth will be primarily driven by the acquisition revenue. SHW completed the acquisition of Valspar in June 2017. Apart from the acquisition revenue growth, SHW’s organic sales are expected to grow by a percentage in the mid-to-high single digits. The Americas Group is expected to take the lead. In fiscal 2017, the Americas Group added 101 new stores, taking the total to 4,620 stores. It remains to be seen how many new stores it will add during the quarter. At the end of 1Q17, SHW had 4,190 stores including the ten stores that it added during the quarter.

The other factors that could affect revenue include pricing and volume growth. All of the companies in the industry have been facing the issue of raw material price increases, and it remains to be seen how much SHW can pass on it to customers by increasing prices. If the company can increase prices effectively, then it could have a positive impact on revenues. Finally, SHW revenues could benefit from favorable currency movement. The US dollar has continued its weakness. The dollar index, which measures the dollar movement against the basket of currencies, has fallen 2.3% in the first three months of 2018.

Investors can hold SHW indirectly by investing in the Materials Select Sector SPDR Fund (XLB), which invests 4.6% in SHW. The fund also provides exposure to DowDuPont (DWDP), Monsanto (MON), and Praxair (PX), which have weights of 23.3%, 8.8%, and 7.0%, respectively, as of April 18, 2018.


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