Sherwin-Williams is a leading global company in the coatings and paint industry. Founded in 1866 in Cleveland, Ohio, by Henry Sherwin and Edward Williams, the company has grown to become one of the largest paint and coatings manufacturers in the world.
The company is primarily engaged in the development, manufacturing, distribution, and sale of paints, coatings, and related products. Its products are mainly targeted at professional painters, industrial, commercial, and retail customers in North America and South America. It also operates in the Caribbean, Europe, Asia, and Australia.
Financial Highlights
Revenue: As of November 5, 2024, the trailing 12-month revenue was $23.05 billion.
Net Income: As of November 5, 2024, the trailing 12-month net income was $2.56 billion.
Earnings Per Share (EPS): As of December 27, 2024, the trailing 12-month EPS was $10.14.
Price-to-Earnings Ratio (PE): As of December 27, 2024, the PE was 33.86.
Market Performance & Valuation
Market Capitalization: As of December 27, 2024, the market cap was $86.459 billion. On January 9, 2025, it was $84.95 billion.
Price-to-Sales Ratio (PSR): As of December 27, 2024, the PSR was 3.75.
Dividend Yield: As of December 27, 2024, the trailing dividend yield was 0.83%.
Sherwin-Williams stock price target cut at Jefferies
On Thursday, Jefferies analysts adjusted their outlook on Sherwin-Williams (NYSE:SHW) shares, reducing their price target to $423 from $439, while reaffirming their Buy rating on the stock. The revision reflects a conservative stance on the anticipated timing of a demand recovery and a modest increase in interest expense expectations for the year 2025.
The analysts noted that while current consensus forecasts are optimistic about a macroeconomic recovery in 2025, they expect these projections to moderate in the coming months. Despite the lowered price target, Jefferies suggests that the market has already factored in these adjustments. The firm’s models continue to indicate potential for Sherwin-Williams shares to rally by more than 20% by the end of 2025, assuming the Federal Reserve maintains a supportive policy stance and no adverse policy events occur.
Why Is Sherwin-Williams Not Exciting?
1. Long-Term Revenue Growth Disappoints
A company’s long-term performance is an indicator of its overall quality. While any business can experience short-term success, top-performing ones enjoy sustained growth for years. Unfortunately, Sherwin-Williams’s 5.2% annualized revenue growth over the last five years was tepid. This was below our standard for the industrials sector.
2. Slow Organic Growth Suggests Waning Demand In Core Business
In addition to reported revenue, organic revenue is a useful data point for analyzing Building Materials companies. This metric gives visibility into Sherwin-Williams’s core business because it excludes one-time events such as mergers, acquisitions, and divestitures along with foreign currency fluctuations – non-fundamental factors that can manipulate the income statement.
Over the last two years, Sherwin-Williams’s organic revenue averaged 3.3% year-on-year growth. This performance was underwhelming and suggests it may need to improve its products, pricing, or go-to-market strategy, which can add an extra layer of complexity to its operations.
3. Free Cash Flow Margin Dropping
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
As you can see below, Sherwin-Williams’s margin dropped by 7.8 percentage points over the last five years. If its declines continue, it could signal higher capital intensity. Sherwin-Williams’s free cash flow margin for the trailing 12 months was 5.9%.