Nucor earnings beat by $0.08, revenue fell short of estimates
On Thursday, Citi reaffirmed its Buy rating on Sherwin-Williams (NYSE:SHW) stock, maintaining a $415.00 price target. The $90.8 billion paint and coatings company, which maintains a "GREAT" financial health score according to InvestingPro, reported its fourth-quarter earnings for 2024, with an adjusted EPS of $2.09, which slightly surpassed Citi’s estimate of $2.06 and matched the FactSet consensus. The earnings beat was attributed to lower corporate expenses than expected. However, the Performance Coatings Group (PCG) delivered earnings before interest and taxes (EBIT) of $606 million, falling short of Citi’s $646 million estimate.
Sherwin-Williams experienced mixed results across its business segments. The residential repaint and Product Finishes segments saw high single-digit growth, while new residential sales grew at a low single-digit rate. Conversely, do-it-yourself (DIY) sales and commercial & property maintenance remained flat. The Consumer Brands Group (CBG) sales declined approximately 4.3% due to unfavorable foreign exchange rates, though there were modest volume increases in North America and organic sales growth in Latin America and the EMEAI region. The PCG sales were slightly down, impacted by unfavorable foreign exchange and price/mix factors. The company noted share gains in packaging and coil, stable industrial wood sales amidst challenging markets, and declining Auto Refinish sales due to lower insurance claims. General Industrial demand also remained weak.
For the first quarter of 2025, Sherwin-Williams provided sales guidance ranging from a slight decrease to a slight increase, while the full-year 2025 sales guidance indicated low single-digit growth, both falling below consensus expectations. The midpoint earnings per share (EPS) guidance for the full year of 2025 is $11.85, notably lower than the consensus of $12.56. InvestingPro data reveals that 7 analysts have recently revised their earnings estimates downward, with the stock currently trading at a high P/E ratio of 35.6x relative to near-term earnings growth. This weaker-than-expected guidance suggests that the housing market recovery may be delayed until the second half of 2025 or even into 2026.
Despite the disappointing EPS guidance, Citi highlighted Sherwin-Williams’ focus on cost control, with plans to expand gross margins through price-cost discipline and efficiency gains. The company also plans to keep selling, general, and administrative (SG&A) expenses to a low single-digit percentage increase, despite transitioning to new buildings. Additionally, Sherwin-Williams is preparing for low single-digit raw material inflation. Positive aspects include healthy growth expectations in the Performance Supplies Group and continued market share gains in the Coil & Packaging (NYSE:PKG) segment.
Citi anticipates a strong negative market reaction to the extended period of demand weakness projected into the second half of 2025 and 2026. Based on comprehensive analysis from InvestingPro, which offers detailed valuation metrics and 13 additional key insights in its Pro Research Report, the stock appears to be trading above its Fair Value. The company maintains strong fundamentals with a healthy gross margin of 48.5% and has consistently raised its dividend for 32 consecutive years, demonstrating resilient financial management despite market challenges.
In other recent news, Sherwin-Williams has experienced several noteworthy developments. Berenberg analysts upgraded Sherwin-Williams stock from Hold to Buy, setting a new price target of $420. This upgrade reflects expectations of increased earnings growth and free-cash-flow generation for the company. Similarly, Evercore ISI raised Sherwin-Williams’ stock price target from $400 to $420, maintaining an Outperform rating and emphasizing the company’s potential for earnings growth.
On the contrary, Jefferies analysts revised their outlook for Sherwin-Williams, reducing their price target to $423 from $439 while maintaining a Buy rating. This adjustment reflects a more conservative stance on the anticipated timing of a demand recovery and a modest increase in interest expense expectations for 2025.
RBC Capital provided an optimistic outlook for the Chemicals & Packaging sector for 2025, favoring Sherwin-Williams for its potential market growth and expected EBIT margin expansion. The company also amended its credit agreement, extending the maturity of $75 million in commitments, a move that could offer Sherwin-Williams more flexibility in its financial operations. These are the recent developments that reflect the dynamic nature of Sherwin-Williams’ performance and its interactions with market analysts.
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