Core Viewpoint - Sherwin-Williams shares have increased by approximately 0.5% since the last earnings report, which is underperforming compared to the S&P 500 [1] Group 1: Earnings Report and Market Reaction - The recent earnings report indicates that estimates for Sherwin-Williams have trended downward over the past month [2] - The stock has received a subpar Growth Score of D and a Momentum Score of D, while the Value Score is rated F, placing it in the lowest quintile for investment strategies [3] Group 2: Outlook and Future Expectations - The overall VGM Score for Sherwin-Williams is F, suggesting a lack of attractiveness across multiple investment strategies [3] - The downward trend in estimates indicates a negative outlook, with Sherwin-Williams holding a Zacks Rank of 3 (Hold), suggesting an expectation of in-line returns in the coming months [4]

Core Insights - Sherwin-Williams Co (NYSE: SHW) stock has increased by 18% over the past year, outperforming the S&P 500's nearly 12% rise, raising questions about its current valuation and potential for a decline of 20-30% [1] - The stock is trading at approximately $359 per share, which is nearly 28 times its free cash flow, indicating a cash flow yield of about 3.6%, contrasting with Nvidia's 50 times cash flow multiple [1] - Sherwin-Williams' revenue growth has been significantly lower at around 5% over the last three years and only 0.2% in the past twelve months, making its high valuation difficult to justify [1] Financial Performance - Sherwin-Williams reported record consolidated net sales of $23.10 billion for 2024, driven by growth in the Paint Stores Group [2] - Diluted net income per share increased by 14.1% to $10.55, and adjusted EBITDA rose by 6.0% to $4.49 billion [2] - The company generated strong cash flow with $3.15 billion in net operating cash and returned $2.46 billion to shareholders through dividends and share repurchases [2] Market Position and Strategy - The company has consistently expanded its retail presence, opening new stores to capture a larger market share, which, along with effective pricing strategies, has bolstered sales and margins [3] - Cost-saving measures, including supply chain optimization and productivity improvements, have enhanced margins and allowed the company to manage market difficulties effectively [3] Growth Concerns - Sherwin-Williams has projected lower-than-anticipated annual profits, raising concerns about short-term growth due to weak demand in significant end markets such as housing, automotive, and aerospace [4] - The company may need to be valued comparably to others achieving 5% revenue growth, questioning its ability to maintain that growth [4] Raw Material Challenges - The production of paints and coatings is heavily dependent on raw materials like titanium dioxide and petrochemical derivatives, with price fluctuations potentially squeezing margins [5] - The company may face challenges in passing on higher costs to consumers, especially in competitive markets [5] Long-term Outlook - As the largest paint and coatings company in the U.S., Sherwin-Williams holds a leading position in North America's professional paint sector, operating over 5,000 company-owned stores [6] - Long-term demand for housing, renovations, and urban development supports the company's growth, alongside the aging housing stock in the U.S. generating a constant need for repainting and maintenance [6]

Core Viewpoint - The article emphasizes the importance of quantitative methods in identifying undervalued stocks across various industries, suggesting that numerical data often provides a clearer picture of a company's potential than narrative descriptions [1]. Group 1: Investment Strategy - The company employs quantitative methods that have been backtested for success to search for undervalued stocks of any size [1]. - The belief is that numbers are more significant than stories in most cases, as they tend to reflect a more realistic outlook on a company's prospects [1]. Group 2: Experience and Knowledge - The company has been investing since 2013 and has gained knowledge through both experience and extensive reading of stock market literature [1]. - Notable books that have influenced the company's investment approach include "100 Baggers," "Financial Shenanigans," and "The Quants" [1].

Financial Data and Key Metrics Changes - Consolidated sales were within the guided range, with adjusted earnings per share growing by 3.7% to $2.25 per share [4][3] - Gross margin and gross profit dollars expanded, while SG&A expenses decreased due to effective spending control [3][4] Business Line Data and Key Metrics Changes - Paint Stores Group sales grew by a low single-digit percentage, with price mix up by mid-single digits and volume down low single digits [6] - Consumer Brands Group sales were within expected range, with more than half of the decrease attributed to unfavorable foreign exchange [7] - Performance Coatings Group sales were below expectations, with decreases in Europe and North America by mid-single digits [9] Market Data and Key Metrics Changes - Residential repaint sales increased by a mid-single-digit percentage despite softness in existing home sales [6] - New residential sales increased by a low single-digit percentage, while commercial and property maintenance sales remained under pressure [6][9] Company Strategy and Development Direction - The company is focused on disciplined capital allocation, investing $352 million in share repurchases and increasing dividends by 10% [4] - The acquisition of Souvenil is expected to close in the second half of the year, enhancing the Consumer Brands Group and complementing existing Latin America business [8][10] Management's Comments on Operating Environment and Future Outlook - Management expects demand in most end markets to remain choppy at least through the first half of 2025, with some markets not likely to gain momentum until 2026 [12] - The company is well-positioned to outperform the market and is confident in its strategy and execution capabilities [12][14] Other Important Information - The company plans to open 80 to 100 new stores throughout the year, with a focus on maintaining low turnover rates among staff [96] - The company is actively managing costs and looking for efficiencies through simplification and digitization [11][25] Q&A Session Summary Question: Pricing environment and tariffs - Management indicated that raw material costs were flat year over year, but tariffs are expected to increase costs slightly in the second quarter [20][21] - The company is prepared to implement price increases if necessary to offset rising costs [22][23] Question: Price mix in Paint Stores Group - The price mix was predominantly driven by price increases, with effective implementation credited to the stores team [28][30] Question: COGS and gross margins - Gross margin improvement was driven by selling price increases in the Paint Stores Group and supply chain efficiencies [32][33] Question: New residential end market outlook - Management remains optimistic about long-term growth in the new residential market despite current challenges [39][40] Question: Res repaint market trends - The residential repaint segment continues to show strength, with positive sentiment and activity despite a flat overall market [43][44] Question: Souvenil acquisition details - The acquisition is expected to enhance the company's position in Latin America, with a strong leadership team and growth potential [102][103] Question: Share gains in commercial and property maintenance - Share gains in these segments are expected to be longer-term, with significant project timelines impacting immediate results [106][107]

Financial Performance - Consolidated net sales decreased by 1.1% to $5.306 billion in Q1 2025, with a 2.3% increase in the Paint Stores Group offsetting declines in the Consumer Brands and Performance Coatings Groups [124][127]. - Diluted net income per share increased by 1.5% to $2.00 in Q1 2025, compared to $1.97 in Q1 2024, despite a $0.03 decrease due to foreign currency translation [138]. - Adjusted EBITDA rose by 4.6% to $937.0 million, representing 17.7% of net sales in Q1 2025 [124]. - The Company reported a net income of $503.9 million, slightly down from $505.2 million in the same period of 2024 [176]. - EBITDA for the three months ended March 31, 2025, was $917.7 million, an increase from $896.2 million in the prior year [176]. - Adjusted EBITDA for the same period was $937.0 million, compared to $896.2 million in 2024, reflecting a significant improvement [176]. Liquidity and Capital Structure - The Company maintained a strong liquidity position with $199.8 million in cash and $2.148 billion of unused capacity under credit facilities as of March 31, 2025 [123][141]. - Total debt outstanding increased to $10.776 billion as of March 31, 2025, from $9.888 billion at December 31, 2024 [155]. - Shareholders' equity rose by $78.9 million to $4.130 billion in Q1 2025, primarily due to net income of $503.9 million [162]. - The company generated net operating cash of $3.151 billion over the twelve months ending March 31, 2025 [170]. - Net operating cash usage was $61.1 million in Q1 2025, compared to $58.9 million in the same period of 2024 [167]. Operational Highlights - The Paint Stores Group's gross profit increased by $79.8 million in Q1 2025, driven by higher net sales from increased selling prices [133]. - The Consumer Brands Group experienced a 6.0% decline in net sales, primarily due to soft DIY demand in North America and unfavorable currency translation impacts [129]. - The Performance Coatings Group's net sales decreased by 4.8%, with a 2.6% impact from unfavorable currency translation [129]. - The company repurchased 1.0 million shares of common stock during the first three months of 2025, with remaining authorization to purchase 33.4 million shares [164]. - The Company incurred $19.3 million in severance and other restructuring expenses during the three months ended March 31, 2025 [176]. Tax and Accounting - The effective tax rate increased to 22.8% in Q1 2025, up from 21.1% in Q1 2024, primarily due to less favorable tax benefits related to employee share-based payments [137]. - There have been no significant changes in critical accounting policies or management estimates since December 31, 2024 [178]. Risks and Forward-Looking Statements - The Company continues to face market risks associated with interest rates, foreign currency, and commodity fluctuations, but does not expect these to materially affect its financial condition [182]. - The Company is exposed to various risks including economic conditions, competition, and supply chain disruptions, which could impact future performance [180]. - Forward-looking statements are based on management's current expectations and are subject to risks and uncertainties that could cause actual results to differ materially [179]. - The Company does not expect foreign currency translation or interest rate movements to have a material adverse effect on its cash flows [182].

Core Viewpoint - Sherwin-Williams reported a slight increase in earnings per share for Q1 2025, but revenues declined year over year, missing consensus estimates, indicating mixed performance across its segments [1][2][3][4]. Financial Performance - The company logged first-quarter 2025 earnings of $2 per share, up approximately 1.5% from $1.97 in the same quarter last year [1]. - Adjusted earnings were $2.25 per share, surpassing the Zacks Consensus Estimate of $2.18 [1]. - Revenues totaled $5,305.7 million, down around 1.1% year over year, and missed the Zacks Consensus Estimate of $5,346.5 million [1]. Segmental Review - The Paint Stores Group segment achieved net sales of $2,939.8 million, up about 2.3% year over year, beating the consensus estimate of $2,919.9 million, driven by a mid-single-digit percentage rise in selling prices [2]. - The Consumer Brands Group segment saw net sales decline by 6% year over year to $762.2 million, although it exceeded the Zacks Consensus Estimate of $761.4 million, impacted by weaker DIY demand and unfavorable currency translation [3]. - The Performance Coatings Group experienced a net sales decrease of roughly 4.8% year over year to $1,602 million, missing the Zacks Consensus Estimate of $1,645.9 million, primarily due to adverse currency translation [4]. Cash Flow and Shareholder Returns - In Q1 2025, the company utilized $61.1 million in net operating cash due to seasonal increases in working capital requirements, which were largely offset by net income [5]. - The company returned $552.1 million to shareholders through dividends and the repurchase of 1 million shares of common stock [6]. Outlook - Sherwin-Williams forecasts consolidated net sales for Q2 2025 to be up or down by a low single-digit percentage year over year, with a similar expectation for full-year 2025 [7]. - Full-year 2025 earnings per share are projected to be in the range of $10.70 to $11.10, with adjusted earnings per share expected between $11.65 and $12.05 [7]. - The company anticipates an effective tax rate in the low 20% range for 2025 [7]. Price Performance - Shares of Sherwin-Williams have increased by 8.4% over the past year, contrasting with a 4.3% decline in the industry [8].

Financial Performance Overview - Sales decreased by 1.1% from $5,367.3 million in 1Q 2024 to $5,305.7 million in 1Q 2025[6] - Gross profit increased by 1.1% from $2,531.0 million in 1Q 2024 to $2,559.1 million in 1Q 2025[6] - Gross margin expanded by 100 basis points to 48.2% in 1Q 2025[6] - Adjusted EPS increased by 3.7% to $2.25 per share[8] - Adjusted EBITDA grew by 4.6% to $937.0 million, with Adjusted EBITDA margin expanding by 100 basis points to 17.7%[8] Segment Performance - Paint Stores Group (PSG) sales increased by 2.3% from $2,873.0 million in 1Q 2024 to $2,939.8 million in 1Q 2025[11] - Consumer Brands Group (CBG) sales decreased by 6.0% from $811.0 million in 1Q 2024 to $762.2 million in 1Q 2025[16] - Performance Coatings Group (PCG) sales decreased by 4.8% from $1,681.9 million in 1Q 2024 to $1,602.0 million in 1Q 2025[22] Liquidity and Debt - Cash position as of March 31, 2025 was $199.8 million[30] - Net credit available was $2,147.8 million as of March 31, 2025[30]

Core Insights - Sherwin-Williams reported $5.31 billion in revenue for Q1 2025, a year-over-year decline of 1.2% [1] - The company's EPS for the same period was $2.25, up from $2.17 a year ago, indicating a positive trend in earnings despite revenue decline [1] - The reported revenue fell short of the Zacks Consensus Estimate of $5.35 billion, resulting in a surprise of -0.76% [1] - The EPS exceeded the consensus estimate of $2.18, delivering a surprise of +3.21% [1] Revenue and Segment Performance - Net sales for the Paint Stores Group reached $2.94 billion, slightly above the average estimate of $2.92 billion, reflecting a year-over-year increase of +2.3% [4] - Consumer Brands Group reported net sales of $762.20 million, which is a decline of -6% compared to the previous year [4] - Performance Coatings Group's net sales were $1.60 billion, below the average estimate of $1.65 billion, representing a year-over-year decrease of -4.8% [4] - Administrative net sales were reported at $1.70 million, significantly higher than the estimated $1.14 million, showing a year-over-year increase of +21.4% [4] Store Metrics - The Paint Stores Group added 18 new stores, surpassing the average estimate of 9 new stores [4] - The total number of stores in the Paint Stores Group reached 4,791, slightly above the average estimate of 4,782 [4] Segment Profitability - Segment profit for the Paint Stores Group was $541.20 million, exceeding the average estimate of $520.36 million [4] - Adjusted segment profit for the Performance Coatings Group was $264.70 million, below the average estimate of $283.62 million [4] - Adjusted segment profit for the Consumer Brands Group was $162.70 million, above the average estimate of $155.01 million [4] Stock Performance - Sherwin-Williams shares have returned -4.9% over the past month, compared to a -0.8% change in the Zacks S&P 500 composite [3] - The stock currently holds a Zacks Rank 3 (Hold), suggesting it may perform in line with the broader market in the near term [3]

Financial Data and Key Metrics Changes - Consolidated sales were within the guided range, with adjusted earnings per share growing by 3.7% to $2.25 per share [5][6] - Gross margin and gross profit dollars expanded, while SG&A expenses decreased due to effective spending control [5][6] - EBITDA margin in dollars expanded, and the company invested $352 million in share repurchases while increasing dividends by 10% [6] Business Line Data and Key Metrics Changes - Paint Stores Group sales grew by a low single-digit percentage, with price mix up by mid-single digits and volume down low single digits [8] - Protective and Marine sales increased by a high single-digit percentage, driven by sectors like oil and gas and high-performance flooring [8][10] - Consumer Brands Group sales were within expected range, with more than half of the decrease attributed to unfavorable foreign exchange [9] - Performance Coatings Group sales were below expectations, with decreases in Europe and North America by mid-single digits [11] Market Data and Key Metrics Changes - Residential repaint sales increased by a mid-single-digit percentage despite softness in existing home sales [8] - New residential sales increased by a low single-digit percentage, while commercial and property maintenance sales remained under pressure [8][9] - The company noted that approximately 80% of consolidated revenue is in the U.S., with less than 2% in China, minimizing tariff impacts [15] Company Strategy and Development Direction - The company is focused on delivering innovative solutions to enhance customer productivity and profitability [7] - Continued investment in growth is evident with plans to open 80 to 100 new stores throughout the year [10][101] - The acquisition of Souvenil is expected to close in the second half of the year, enhancing the company's position in Latin America [10][108] Management's Comments on Operating Environment and Future Outlook - Management expects demand in most end markets to remain choppy through the first half of 2025, with some markets not likely to gain momentum until 2026 [14][15] - The company is confident in its strategy and ability to adapt to market challenges, including inflation and supply chain issues [17] - Management reiterated full-year sales and earnings per share guidance, with an updated outlook expected in July [16][17] Other Important Information - The company is focused on simplification and digitization to drive efficiencies over time [13] - SG&A expenses in the administrative function decreased by a mid-teens percentage, contributing to overall cost control [13] Q&A Session Summary Question: Pricing environment and tariffs - Management indicated that raw material costs were flat year over year, but tariffs are expected to increase costs slightly in the second quarter [22][23] - The company is prepared to implement price increases if necessary to offset rising costs [26] Question: Price mix in Paint Stores Group - The price mix was predominantly driven by price increases, with effective implementation credited to the stores team [31] Question: COGS and gross margins - Gross margin improvement was attributed to selling price increases in the Paint Stores Group and supply chain efficiencies [37] Question: New residential end market outlook - Management remains optimistic about long-term growth in the new residential segment despite current market challenges [43] Question: Res repaint market trends - The residential repaint segment continues to perform well, with positive sentiment and activity despite a flat market [47] Question: Souvenil acquisition details - The acquisition is expected to enhance the company's market position in Latin America, with a strong leadership team and brand [106][108]

分组1 - Sherwin-Williams reported quarterly earnings of $2.25 per share, exceeding the Zacks Consensus Estimate of $2.18 per share, and showing an increase from $2.17 per share a year ago, representing an earnings surprise of 3.21% [1] - The company posted revenues of $5.31 billion for the quarter ended March 2025, which was below the Zacks Consensus Estimate by 0.76% and a decrease from $5.37 billion in the same quarter last year [2] - Over the last four quarters, Sherwin-Williams has surpassed consensus EPS estimates three times but has not beaten consensus revenue estimates [2] 分组2 - The stock has lost approximately 2.3% since the beginning of the year, while the S&P 500 has declined by 6% [3] - The current consensus EPS estimate for the upcoming quarter is $3.85 on revenues of $6.38 billion, and for the current fiscal year, it is $11.80 on revenues of $23.52 billion [7] - The Zacks Industry Rank for Chemical - Specialty is currently in the bottom 40% of over 250 Zacks industries, indicating potential challenges for stock performance [8]