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Sherwin-Williams Stock Rises on Strong Q2 2018 Earnings

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Sherwin-Williams’ Q2 2018 revenue

Sherwin-Williams reported record second-quarter revenue of $4.77 billion in Q2 2018, implying growth of 27.8% over Q2 2017. The company beat Wall Street analysts’ estimates of $4.67 billion. SHW’s revenue grew due to the contribution from the acquisition of Valspar, higher volumes across The Americas Group, and higher selling prices. All of SHW’s reporting segments witnessed revenue growth on a year-over-year basis.

The Valspar acquisition resulted in a CAGR (compound annual growth rate) of ~12% in SHW’s second-quarter revenue since 2013. At the end of the second quarter, SHW had a total of 4,929 stores, compared to 4,842 in Q2 2017.

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Q2 2018 adjusted EPS

Sherwin-Williams reported adjusted earnings per share of $5.73, which beat analysts’ expectation of $5.66. On a year-over-year basis, the adjusted earnings per share represented growth of 26.8%. The adjusted EPS excludes acquisition-related costs and environmental provisions. SHW’s adjusted EPS growth was mainly driven by the Valspar acquisition. On the other hand, unfavorable foreign currency and higher raw material costs had an adverse impact on SHW’s EPS.

Guidance and stock price

In Q3 2018, SHW expects its revenue to grow in a mid-to-high-single-digit percentage. For full-year 2018, the revenue is projected to grow at high teens to low twenties as a percentage. SHW raised its 2018 full-year adjusted earnings per share in the range of $19.05–$19.35. Also, SHW expects its tax rate to be in the low twenties as a percentage.

SHW was trading 2.1% up at the time of writing this article. SHW’s peers PPG Industries (PPG), and RPM International (RPM) were up by 1.6% and 0.8% respectively while Axalta (AXTA) was trading flat.

Investors can indirectly access Sherwin-Williams by investing in the Materials Select Sector SPDR Fund (XLB), which has invested 5.2% of its portfolio in Sherwin-Williams.

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