Sherwin-Williams stock rating reiterated at Outperform by RBC Capital

Investing.com - RBC Capital has reiterated an Outperform rating and $400.00 price target on Sherwin-Williams (NYSE:SHW), a prominent chemicals industry player with a $90.5 billion market cap, following a sell-side dinner with company executives on August 21. According to InvestingPro data, the stock currently appears overvalued relative to its Fair Value.

The dinner included CEO Heidi Petz, CFO Al Mistysyn, and several business leaders who reinforced key messages previously communicated during a recent non-deal roadshow.

RBC Capital expects Sherwin-Williams to return to mid-single-digit percentage topline growth, high-single-digit percentage EBITDA growth, and double-digit percentage EPS growth in 2026 and beyond, even with just 1-2% market growth.

The firm cited three main factors supporting this outlook: 100-200 basis points of additional long-term Paint Stores Group growth from competitor disruptions, margin expansion from cost reduction initiatives and SG&A improvements, and capital allocation focusing on deleveraging to 2-2.5x, share buybacks, and industrial bolt-on acquisitions.

RBC Capital also expects the Suvinil acquisition to close by year-end, potentially adding $0.20 or more in annual EPS accretion.

In other recent news, Sherwin-Williams has reported weaker-than-expected quarterly results, prompting several financial firms to adjust their outlooks on the company. Mizuho (NYSE:MFG) lowered its price target to $385, citing the company’s second-quarter adjusted earnings per share of $3.38, which fell short of both their estimate of $3.85 and the consensus forecast of $3.81. Same-store sales saw a modest increase of 0.8% year-over-year, with volume declining slightly. BMO Capital also reduced its price target to $391, following a notable earnings per share miss and a cut in guidance, though they maintain a positive long-term outlook. KeyBanc maintained its Sector Weight rating, highlighting softer demand in U.S. construction and industrial markets, and reduced its 2025 earnings per share estimate by 4%. Evercore ISI adjusted its price target to $380, pointing to challenging market conditions and the need for volume growth to drive earnings expansion. Citi lowered its price target to $375, describing the current market as a "critical inflection point" for North American architectural coatings. Despite these challenges, Sherwin-Williams continues to invest in growth initiatives within its Paint Stores Group.

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