If there was an unkind word to be said about Sherwin-Williams (NYSE:SHW) I'm not sure what exactly that word is right now. The company recently revised its third-quarter guidance, and the picture is even rosier than it was previously. The market is responding accordingly, and Sherwin-Williams stock looks like a buy on par with buckets of its newly-recognized color of the year, Urbane Bronze.
Sherwin-Williams Brightens Its Own Corner
Like a fresh coat of paint, Sherwin-Williams is brightening up the corner where it is, and delivering some exciting new results for investors. The company offered another revision on its third-quarter numbers, and the new numbers look even better than they did previously. The company, reports note, is looking for third-quarter sales to be up between 3% and 5%, and that's over recent projections that had a “low-single-digit” percentage on tap.
Better yet, consensus estimates figured that the company's sales would jump just 1.6%, which means Sherwin-Williams is on track to potentially more than triple original estimates. A breakdown by market area reveals the source of the gain, which is as we figured earlier: huge gains in people staying home and repainting their houses. The Americas Group third quarter sales, the company revealed, are expected to be up that aforementioned low-single-digit, but the Consumer Brands Group is looking at gains in the lower-twenties range.
The company's latest expectations on earnings per share also improved, with the numbers going from a range of $19.21 to $20.71 up to $20.96 to $21.46. These gains come in spite of the fact that the company expects its full-year figures to be either flat or slightly up against last year's figures.
The Analyst Picture Brightens Still Further
A look at the analyst consensus shows us an even brighter picture. 30 days ago, the analyst picture was fairly evenly split, leaning just slightly to “buy.” There was one “sell” rating and one “strong buy” rating, which pretty much average out to neutral, and there were 10 “hold” ratings to match up against 11 “buy” ratings. Factoring out the conflicts leaves just one extra “buy” so it's a slight lean.
Today, however, the picture is much different. The outliers remain the same—one “sell” and one “strong buy”—but now the ratio of “hold” to “buy” is nine to 14.
What's more, price targets are on the rise as well. Loop Capital bolstered its target from $695 to $795. Deutsche Bank added a hefty $85 to its original $700 target. Earlier today, Credit Suisse Group and CSFB came out with the same move, boosting from the original $734 to $765, and these are the price target moves made just in the last week. Back on September 10, KeyCorp started coverage on the stock, giving it an “overweight” ranking and a price target of $805 per share. All of this is excellent news when you consider Sherwin-Williams is currently trading at $704.07 a share, having seen some profit-taking kick in. Just ahead of trading, the stock was nearly trading at $714.
Planning to Brighten Beyond the Present Day
Analysts love Sherwin-Williams, and right now, investors seem to to. Customers, meanwhile, are pushing Sherwin-Williams forward like no tomorrow. The company continues to benefit from the increasingly stay-at-home stance, where customers are buying paint in large quantities to brighten up their homes and make them more comfortable to spend large amounts of time contained within. Of course, it's not just house paint that's giving Sherwin-Williams an edge; just recently, the company rolled out a product known as JetPen, designed for aircraft fuselages and cabins. The JetPen offers all the durability of normal aircraft paint, but condensed into a touch-up pen application similar to those you see for cars.
While JetPen isn't likely to boost the company's earnings reports appreciably—it's a bit too niche of a product to do that—it demonstrates that Sherwin-Williams is benefiting from more than just random circumstances. Sherwin-Williams is moving to innovate, and delivering exciting new results in paint and coverings. The “brighten up your corner” phenomenon can't continue forever. People repainting their houses is unsustainable, but the return to anything approaching normalcy at work will shore up some of those losses as businesses need to repaint as much as customers do.
It's clear, though, that Sherwin-Williams is working to protect itself against the day where everyone who was going to repaint their houses has done so, and that makes this company even more attractive that it was before.
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