Research

SHW – Market expectations are for Uniform ROA expansion, but management has concerns about markets, growth, and their pipeline

  • The Sherwin-Williams Company (SHW:USA) currently trades near historical highs relative to UAFRS-based (Uniform) Earnings, with a 25.6x Uniform P/E, implying bullish expectations for the firm. However, management has concerns about the strength of the housing and repainting markets, Performance Coatings Group growth, and their project pipeline
  • Specifically, management may be exaggerating the breadth of their growth efforts, their focus on helping customers achieve their goals, and their cross-segment selling opportunities. Also, they may be concerned about soft non-domestic demand, the success of their promotional efforts, and potential currency headwinds. Moreover, they may lack confidence in their ability to sustain Performance Coatings Group revenue growth, volume growth, and synergy realization. Finally, they may be exaggerating their business opportunities and the potential of their new project pipeline, and may be concerned about geographical demand variability.