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Why Sherwin-Williams Stock Fell 8% Last Week


Oct. 29 2018, Updated 10:04 a.m. ET

Sherwin-Williams’ disappointing third-quarter

On October 25, Sherwin-Williams (SHW) announced its third-quarter earnings results. SHW reported adjusted EPS of $5.68, a rise of 19.6% on a year-over-year basis. In the third quarter of 2017, it reported adjusted EPS of $4.75.

Sherwin-Williams failed to meet analysts’ EPS estimate of $5.74 in the third quarter. Its EPS were adversely impacted by $0.16 per share by the increased cost of ramping up sales at Lowe’s (LOW).

SHW failed to meet revenue expectations as well. SHW reported revenue of $4.73 billion, implying growth of 5% over the previous year. However, it again failed to meet analysts’ expectation of $4.81 billion. The change in accounting standards had an adverse impact of 0.8% on SHW’s revenue.

Finally, SHW narrowed its adjusted EPS for 2018 to the range of $19.05–$19.20 compared to its earlier guidance of $19.05–$19.35.

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John G, Morikis, SHW’s chair, president, and CEO, said, “We continue to make great progress on the integration of Sherwin-Williams and Valspar into a faster growing, more profitable enterprise, but our results in the third quarter don’t fully reflect that progress. Revenue growth slowed from the pace set in the second quarter, due primarily to slower growth in some North American architectural businesses, a sequential slowdown in some of our industrial businesses in China and Europe and unfavorable currency translation rate changes.”

Stock price updates

Investors were disappointed in SHW’s third-quarter earnings results. The stock fell 8.2% and closed at $370.44 in the week that ended on October 26. The fall resulted in the stock trading 13.9% below its 100-day moving average price of $430.43. On a year-to-date basis, SHW is now down 9.7%. Peer PPG Industries (PPG) has fallen 12%, while RPM International (RPM) has risen 13.0%.

SHW’s 14-day relative strength index is 19, which suggests that the stock has moved into the oversold territory. There could be a short bounce back in SHW’s price.

SHW underperformed the PowerShares DWA Industrials Momentum Portfolio ETF (PRN), which fell 3.6% in the week. The fund invests 3.4% of its portfolio in Sherwin-Williams.


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