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SHW – Market expectations are for Uniform ROA to reach new peaks, but management may have concerns about guidance, growth, and their global operations

October 23, 2020

  • The Sherwin-Williams Company (SHW:USA) currently trades at a historical high relative to UAFRS-based (Uniform) earnings, with a 27.7x Uniform P/E. At these levels, the market has bullish expectations for the firm, but management may have concerns about sales guidance, store openings, and their global operations
  • Specifically, management may lack confidence in their ability to meet sales guidance and continue opening more stores. Moreover, they may be concerned about the pause in demand due to the pandemic and headwinds related to their global supply chain. In addition, they may be exaggerating the available growth opportunities and their focus on driving shareholder value. Furthermore, they may lack confidence in their ability to mitigate Performance Coatings Group segment declines, maintain strong performance in Asia, and sustain Protective & Marine improvements. Finally, management may be exaggerating the positive exterior season for contractors.