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Investing.com - Sherwin-Williams (NYSE:SHW), currently trading at $342.67 and showing high valuation multiples according to InvestingPro data, maintained its Sector Weight rating from KeyBanc on Wednesday as the research firm cited softer demand in U.S. construction and industrial markets.
KeyBanc lowered its 2025 earnings per share estimate by 4% after Sherwin-Williams reduced its own EPS guidance range by the same percentage. The paint manufacturer, which currently maintains a solid financial health score of "GOOD" based on InvestingPro analysis, reported June demand was weaker than anticipated, with no signs of improvement expected in the second half of the year.
The company plans to increase restructuring initiatives while continuing to invest in its Performance Coatings Group (PSG) during the current downturn. Despite current challenges, Sherwin-Williams maintains impressive dividend credentials, having raised dividends for 32 consecutive years. KeyBanc noted the negative margin impact was surprising, as it had expected more significant cuts to selling, general and administrative expenses.
Sherwin-Williams anticipates approximately 35 basis points ($80 million) in restructuring benefits over the next 12 months. The company, which maintains a healthy gross profit margin of 48.7% and return on equity of 70%, also faces headwinds from negative operating leverage and fixed cost absorption as it adjusts product inventory levels. Discover more detailed financial metrics and 12 additional ProTips with an InvestingPro subscription.
On a positive note, pricing in the PSG segment is performing better than expected, with low-to-mid-single-digit increases for 2025 compared to initial projections of low-single-digit growth. Additionally, raw material costs are now expected to remain flat in 2025, aligning more closely with KeyBanc’s expectations. The company’s market position remains strong with $23 billion in revenue over the last twelve months.
In other recent news, Sherwin-Williams reported its second-quarter earnings for 2025, revealing an adjusted earnings per share (EPS) of $3.38, which fell short of the consensus forecast of $3.81. Despite the earnings miss, the company slightly beat revenue expectations, posting $6.31 billion compared to the anticipated $6.30 billion. Mizuho (NYSE:MFG) lowered its price target for Sherwin-Williams to $385, citing weaker-than-expected quarterly results and reduced full-year guidance. Similarly, Evercore ISI adjusted its price target to $380, highlighting concerns over market conditions and the lack of volume growth. Citi also revised its price target to $375, describing the current market environment as a "critical inflection point" for North American architectural coatings. All three firms maintained their respective ratings, with Mizuho and Evercore ISI keeping an Outperform rating and Citi maintaining a Neutral rating. These developments reflect ongoing challenges in the market as Sherwin-Williams invests in growth initiatives while facing competitive pressures.
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