Core Viewpoint - Sherwin-Williams has entered into a definitive agreement to acquire BASF's Brazilian architectural paints business, Suvinil, for $1.15 billion in cash, enhancing its market position in Brazil's paint industry [1][3]. Company Overview - Sherwin-Williams is a global leader in the manufacture and sale of paint and coatings, with a diverse portfolio of well-known brands and a strong distribution network [4]. - The company operates over 5,000 stores and serves various customer segments, including professional, industrial, and retail [4]. Acquisition Details - The acquisition of Suvinil, which had sales of approximately $525 million in 2024, is expected to provide significant growth and operational synergies [2][5]. - Suvinil is recognized as a leading provider of architectural paints in Brazil, known for its innovative products and strong brand reputation [2][3]. - The transaction is anticipated to close in the second half of 2025, pending regulatory approval in Brazil [3][5]. Strategic Implications - The acquisition is expected to accelerate Sherwin-Williams' growth in the Brazilian market, leveraging Suvinil's established brand and distribution channels [3][5]. - The purchase price reflects a low teens EBITDA multiple, indicating a favorable valuation based on expected post-transaction synergies [3][5]. - Sherwin-Williams plans to finance the acquisition through cash on hand, existing liquidity, and new debt, maintaining a net-debt to EBITDA ratio within the targeted range of 2.0 to 2.5 times [5].

Core Insights - The article emphasizes a fundamentals-based approach to value investing, highlighting the importance of long-term durability and robust balance sheets over low multiples [1] - It challenges the misconception that low multiple stocks are inherently cheap, advocating for a focus on companies with steady long-term growth and minimal cyclicality [1] - The author acknowledges the risks associated with investing in successful companies, particularly the potential to overpay, but suggests that in certain situations, the growth potential may outweigh immediate price concerns [1] Company Analysis - The Sherwin-Williams Company (NYSE: SHW) was recommended as a buy in August 2024, based on expectations of an improving macro environment due to anticipated rate cuts [1] - The analysis indicates a preference for companies that demonstrate consistent growth and financial stability, which are seen as more attractive investment opportunities [1] Investment Philosophy - The article advocates for a value investing strategy that prioritizes long-term growth and financial health over short-term price metrics [1] - It suggests that while valuation is important, there are scenarios where the potential for future development can justify higher current prices [1]

Q4 and Full Year 2024 Results January 30, 2025 FORWARD-LOOKING STATEMENTS Certain statements contained in this presentation constitute "forward-looking statements" within the meaning of federal securities laws. These forward-looking statements are based upon management's current expectations, predictions, estimates, assumptions and beliefs concerning future events and conditions and may discuss, among other things, anticipated future performance (including sales and earnings), expected growth, future busine ...

Core Insights - Sherwin-Williams reported fourth-quarter 2024 earnings of $1.90 per share, a 36.7% increase from $1.39 in the same quarter last year, with adjusted earnings at $2.09 per share, exceeding the Zacks Consensus Estimate of $2.07 [1][2] Financial Performance - The company posted revenues of $5,297.2 million, reflecting a year-over-year increase of 0.9%, but fell short of the Zacks Consensus Estimate of $5,309.4 million [2] - The Paint Stores Group segment achieved net sales of $3,044.9 million, up 3.4% year over year, although it was below the consensus estimate of $3,047.9 million [3] - The Consumer Brands Group segment saw a decline in net sales by 4.3% year over year to $662.2 million, surpassing the Zacks Consensus Estimate of $643.3 million [4] - The Performance Coatings Group experienced a decrease in net sales by approximately 1.6% year over year to $1,589 million, missing the Zacks Consensus Estimate of $1,611.1 million [5] Segment Analysis - The Paint Stores Group's growth was driven by price increases and sales volume growth, particularly in residential repainting and new construction [3] - The Consumer Brands Group's decline was influenced by a 5.5% negative impact from foreign currency translation, although it was slightly offset by modest sales volume growth [4] - The Performance Coatings Group's sales volume growth was offset by lower selling prices due to product mix, with a 1.7% negative impact from foreign currency translation [5] Cash Flow and Shareholder Returns - For 2024, Sherwin-Williams generated $3.15 billion in net operating cash and returned $2.46 billion to shareholders through dividends and stock repurchases [6] - The company had authorization to repurchase 34.4 million shares of its common stock as of December 31, 2024 [6] Future Outlook - The company anticipates consolidated net sales for Q1 2025 to fluctuate by a low single-digit percentage year over year, with full-year 2025 earnings per share projected between $10.70 and $11.10 [7] - Full-year adjusted earnings per share are expected to range from $11.65 to $12.05, with an effective tax rate forecasted to be in the low 20% for 2025 [7] Stock Performance - Sherwin-Williams shares have increased by 17.2% over the past year, contrasting with a 16.5% decline in the industry [8]

Group 1 - Sherwin-Williams reported revenue of $5.3 billion for the quarter ended December 2024, reflecting a year-over-year increase of 0.9% [1] - The company's EPS for the quarter was $2.09, up from $1.81 in the same quarter last year, indicating a positive trend in earnings [1] - The reported revenue was slightly below the Zacks Consensus Estimate of $5.31 billion, resulting in a revenue surprise of -0.23% [1] - The EPS exceeded the consensus estimate of $2.07, delivering a surprise of +0.97% [1] Group 2 - Sherwin-Williams' shares have returned +6% over the past month, outperforming the Zacks S&P 500 composite's +1.2% change [3] - The company currently holds a Zacks Rank 4 (Sell), suggesting potential underperformance relative to the broader market in the near term [3] Group 3 - In the Paint Stores Group, net new stores totaled 34, below the average estimate of 40 [4] - The number of stores in the Paint Stores Group was 4,773, slightly below the average estimate of 4,779 [4] - Net sales for the Paint Stores Group were reported at $3.04 billion, compared to the estimated $3.05 billion, reflecting a year-over-year increase of +3.4% [4] - Consumer Brands Group net sales were $662.20 million, exceeding the average estimate of $643.28 million, but showing a year-over-year decline of -4.4% [4] - Performance Coatings Group net sales were $1.59 billion, slightly below the average estimate of $1.61 billion, representing a year-over-year decrease of -1.6% [4] - Administrative net sales were reported at $1.10 million, above the average estimate of $1.04 million, with no year-over-year change [4] Group 4 - Segment profit for the Paint Stores Group was $606.40 million, slightly below the estimated $607.10 million [4] - Adjusted segment profit for the Performance Coatings Group was $277.90 million, compared to the average estimate of $279.63 million [4] - Adjusted segment profit for the Consumer Brands Group was $82 million, below the average estimate of $104.81 million [4]

Core Insights - Sherwin-Williams reported strong earnings growth in Q4 2024 with adjusted EPS of $2.09, exceeding analyst expectations, but revenue of $5.297 billion fell short of estimates [1][3] Financial Performance - Adjusted EPS increased by 15.5% year-over-year from $1.81 to $2.09 [3] - Revenue was relatively flat year-over-year, with a slight increase of 0.9% from $5.252 billion to $5.297 billion [3] - Net income rose significantly by 34.8% to $480.1 million compared to $356.2 million in the previous year [3] - Operating margin improved to 11.6%, up from 9% in the prior year [3] Business Segments Overview - Sherwin-Williams operates through three main segments: Paint Stores Group, Consumer Brands Group, and Performance Coatings Group [4] - The Paint Stores Group achieved a 3.4% increase in net sales to $3.04 billion, with profits rising by 6.9% to $606.4 million [6] - The Consumer Brands Group experienced a 4.3% decline in net sales to $662.2 million but improved profitability significantly from $3.6 million to $66.6 million [7] - The Performance Coatings Group saw a 1.6% drop in net sales but managed a profit increase of 3.9% to $229 million [8] Strategic Focus - The company is focusing on growth through strategic investments, price optimization, operational efficiencies, customer service enhancements, and technology advancements [5] - Management projects diluted net income per share for 2025 in the range of $10.70 to $11.10, and adjusted EPS between $11.65 and $12.05, indicating optimism despite potential demand challenges [9] Future Outlook - The company remains committed to capitalizing on market share opportunities and investing in technology to drive growth [9] - Investors are advised to monitor shifts in market demand and the company's ongoing efforts in technology investments and operational enhancements [10]

Core Viewpoint - Sherwin-Williams reported quarterly earnings of $2.09 per share, exceeding the Zacks Consensus Estimate of $2.07 per share, and showing an increase from $1.81 per share a year ago, indicating a positive earnings surprise of 0.97% [1] Financial Performance - The company posted revenues of $5.3 billion for the quarter ended December 2024, slightly missing the Zacks Consensus Estimate by 0.23%, but showing a year-over-year increase from $5.25 billion [2] - Over the last four quarters, Sherwin-Williams has surpassed consensus EPS estimates two times, but has not beaten consensus revenue estimates during the same period [2] Stock Performance - Sherwin-Williams shares have increased approximately 6% since the beginning of the year, outperforming the S&P 500's gain of 2.7% [3] - The stock's immediate price movement will largely depend on management's commentary during the earnings call [3] Future Outlook - The current consensus EPS estimate for the upcoming quarter is $2.21 on revenues of $5.39 billion, and for the current fiscal year, it is $12.36 on revenues of $23.78 billion [7] - The estimate revisions trend for Sherwin-Williams is currently unfavorable, resulting in a Zacks Rank 4 (Sell), indicating expected underperformance in the near future [6] Industry Context - The Chemical - Specialty industry, to which Sherwin-Williams belongs, is currently ranked in the bottom 14% of over 250 Zacks industries, suggesting potential challenges ahead [8] - The performance of Sherwin-Williams may be influenced by the overall outlook for the industry [8]

Financial Performance - Consolidated Net sales increased to a record $23.10 billion, with a 1.7% increase in net sales from stores in the Paint Stores Group open for more than twelve months[5]. - Diluted net income per share rose 14.1% to $10.55, while adjusted diluted net income per share increased 9.5% to $11.33 for the full year[5]. - Generated net operating cash of $3.15 billion, representing 13.7% of net sales, and returned $2.46 billion to shareholders through dividends and share repurchases[5][18]. - Net sales for Q4 2024 reached $5,297.2 million, a slight increase from $5,252.2 million in Q4 2023, while total net sales for the year were $23,098.5 million compared to $23,051.9 million in 2023[30]. - Net income for Q4 2024 was $480.1 million, up from $356.2 million in Q4 2023, resulting in a diluted net income per share of $1.90 compared to $1.39 in the previous year[30]. - The company reported a net income of $2,681.4 million for the year ended December 31, 2024, compared to $2,388.8 million in 2023, reflecting a year-over-year increase of approximately 12.2%[40]. Sales Performance by Segment - Paint Stores Group net sales increased by 3.4% to $3.04 billion, driven by selling price increases and low-single digit percentage sales volume growth[9]. - Consumer Brands Group net sales decreased by 4.3% to $662.2 million, impacted by a 5.5% unfavorable foreign currency translation[11]. - Performance Coatings Group net sales decreased by 1.6% to $1.59 billion, primarily due to a 1.7% unfavorable foreign currency translation[14]. - The Paint Stores Group generated net sales of $3,044.9 million in Q4 2024, an increase from $2,944.6 million in Q4 2023, with segment profit rising to $606.4 million from $567.3 million[31]. - The Performance Coatings Group reported net sales of $1,589.0 million in Q4 2024, slightly down from $1,614.2 million in Q4 2023, but segment profit increased to $229.0 million from $220.3 million[31]. Future Guidance and Projections - Full year 2025 diluted net income per share guidance is projected to be between $10.70 and $11.10, with adjusted diluted net income per share guidance between $11.65 and $12.05[5][19]. - The company expects first quarter 2025 consolidated net sales to be up or down a low-single digit percentage compared to Q1 2024[20]. - Anticipated costs associated with the transition into new buildings in 2025 are expected to be $100 million, with an additional $40 million increase in interest expense due to refinancing activities[20]. - The company aims to control spending tightly, expecting growth in SG&A to moderate to a low-single digit level[20]. Asset and Liability Management - Total assets increased to $23,632.6 million as of December 31, 2024, compared to $22,954.4 million in 2023, indicating a growth in the company's asset base[34]. - Current liabilities rose to $6,808.7 million in 2024 from $6,626.9 million in 2023, with short-term borrowings increasing to $662.4 million from $374.2 million[34]. Cost Management and Expenses - The administrative segment reported a loss of $286.4 million in Q4 2024, an improvement from a loss of $317.2 million in Q4 2023, indicating better cost management[31]. - The company incurred a loss of $41.8 million related to the devaluation of the Argentine peso during the year ended December 31, 2023[42]. - The company’s total interest expense for the year ended December 31, 2024, was $415.7 million, slightly down from $417.5 million in 2023[40]. Capital Expenditures and Dividends - Capital expenditures for the year ended December 31, 2024, are expected to be $1,070.0 million, up from $888.4 million in 2023, reflecting a growth of about 20.5%[42]. - Cash dividends for the year ended December 31, 2024, are projected at $723.4 million, an increase from $623.7 million in 2023, representing a rise of approximately 16%[42]. Strategic Focus and Risk Management - The company plans to continue focusing on market expansion and product innovation to drive future growth, particularly in international markets[24]. - The company is actively managing risks related to supply chain disruptions and inflation, which could impact future performance[25]. - EBITDA for the year ended December 31, 2024, is reported at $4,491.5 million, compared to $4,149.9 million for the previous year, indicating a year-over-year increase of approximately 8.2%[40]. - Adjusted EBITDA for the year ended December 31, 2024, is reported at $4,239.1 million, compared to $4,149.9 million in 2023, showing an increase of about 2.1%[40].

Core Insights - Sherwin-Williams reported strong fourth quarter results with consolidated net sales growing by 0.9% year-over-year to $5.30 billion, driven primarily by the Paint Stores Group [1][2] - The company achieved a record full-year net sales of $23.10 billion, with a gross margin expansion of 180 basis points to 48.5% [1][7] - Adjusted diluted earnings per share increased by 15.5% to $2.09 in the fourth quarter and by 9.5% to $11.33 for the full year [1][7] Financial Performance - Fourth quarter net sales were $5,297.2 million, up from $5,252.2 million, with a net income per diluted share of $1.90, a 36.7% increase from $1.39 [2][24] - Income before income taxes rose by 29.9% to $615.6 million, reflecting higher net sales and lower provisions for environmental matters [2][3] - For the full year, net income increased to $2,681.4 million, with diluted net income per share rising to $10.55 from $9.25 [24] Segment Performance - The Paint Stores Group saw net sales increase by 3.4% to $3,044.9 million, with segment profit rising by 6.9% to $606.4 million [5][6] - The Consumer Brands Group experienced a decline in net sales by 4.3% to $662.2 million, but adjusted segment profit increased by 9.8% to $82.0 million [6][9] - The Performance Coatings Group's net sales decreased by 1.6% to $1,589.0 million, while segment profit increased by 3.9% to $229.0 million [11][12] Cash Flow and Shareholder Returns - The company generated $3.15 billion in net operating cash, returning $2.46 billion to shareholders through dividends and share repurchases [14] - The company repurchased 5.2 million shares during the year and had authorization to purchase an additional 34.4 million shares [14] 2025 Guidance - For 2025, Sherwin-Williams expects consolidated net sales to increase by a low-single digit percentage, with diluted net income per share guidance in the range of $10.70 to $11.10 [15][16] - The company anticipates continued demand softness in several end markets but sees significant above-market growth opportunities [15][16]

Core Viewpoint - Sherwin-Williams is set to release its fourth-quarter 2024 results on January 30, with mixed expectations regarding earnings performance and sales growth [1][2]. Sales Estimates - The Zacks Consensus Estimate for total sales in the upcoming quarter is $5,316 million, reflecting a year-over-year increase of approximately 1.2% [2]. - The Consumer Brands Group is expected to report net sales of $644.6 million, indicating a decline of 6.9% year over year [3]. - The Performance Coatings Group's sales estimate stands at $1,616.4 million, suggesting a slight increase of 0.1% [3]. - The Paint Stores Group is projected to achieve sales of $3,048 million, which represents a 3.5% increase from the previous year [3]. Factors Influencing Performance - The company is implementing aggressive cost-cutting measures, optimizing its supply chain, and focusing on productivity improvements, which are anticipated to support margins in the fourth quarter [4]. - Efforts to enhance selling prices and benefits from acquisitions are likely to contribute positively to profitability [4]. - Weakness in the DIY market is expected to negatively impact revenues for the Consumer Brands Group, particularly due to inflation and low existing house sales in North America [5]. - Challenges in the Performance Coatings Group, especially in the heavy equipment and transportation segments, are expected to pressure revenues [6]. - Recent hurricanes in the Southeast United States may have disrupted operations and affected fourth-quarter performance [7]. Earnings Prediction - The Earnings ESP for Sherwin-Williams is -2.43%, indicating a lower likelihood of an earnings beat, as the Most Accurate Estimate is $2.02 compared to the Zacks Consensus Estimate of $2.07 [9]. - The company currently holds a Zacks Rank of 4 (Sell), suggesting a less favorable outlook for earnings performance [10].