Building Trends Paint Bright Sherwin-Williams Outlook
Paint is about as old-economy as it gets. Archaeologists estimate that the first ochre-based cave paintings date back 40,000 years, and one of the leaders in the 21st Century paint market, Sherwin-Williams, got its start in 1866.
Nearly 150 years later, Sherwin-Williams (NYSE:SHW) is still figuring out new ways to grow its business and fend off the competition.
The company makes and distributes paints and other coatings for the construction, industrial, marine and automotive markets and also operates its own paint and coatings stores.
Lately, its growth strategy has centered on increasing its rate of store openings and building its lead as a supplier to construction and painting contractors. Those initiatives, combined with favorable macro trends, such as the recovery of the construction and remodeling markets, should help it see a big uptick in earnings this year.
Sherwin-Williams, an IBD 50 stock, gets most of its revenue from its Paint Stores Group, which operates stores that sell Sherwin-Williams’ brand paints, coatings and accessories.
It also has a Latin America Coatings Group that makes, distributes and sells company brand products in Latin America; a Consumer Group that produces the paints and coatings that company and third-party retailers sell; and a Global Finishes Group that makes and sells product finishes, automotive finishes, protective and marine coatings, and original-equipment-manufacturer coatings, mainly in the Americas, Europe and Asia.
Sherwin-Williams is best known for its lineup of architectural coatings such as paint, primers, sealers and wood treatments. The company’s paint lineup includes its namesake brand as well as the Dutch Boy brand.
It mainly competes with PPG Industries (NYSE:PPG) — which owns the Glidden and Pittsburgh Paints brands, among others — as well as rivals Valspar (NYSE:VAL) and Berkshire Hathaway‘s (NYSE:BRKA) Benjamin Moore.
These paint suppliers have seen steady financial growth in recent quarters amid an ongoing rebound in key markets, analysts say.
“The end markets have been doing well, overwhelmingly driven by the North American construction/remodeling market, which has benefited from the recovery of the U.S. housing market,” Longbow Research analyst Dmitry Silversteyn told IBD.
He calls Sherwin-Williams “the “800-pound gorilla” in the professional contractor market. “They are capturing market share and continuing to add stores and building relationships with contractors.”
RBC Capital Markets estimates that 70% of Sherwin-Williams’ sales are tied to U.S. construction, with the residential market making up the lion’s share of U.S. paint sales.
As those markets have improved, so has the company’s share price. Sherwin-Williams stock set a high of 291.27 on Feb. 24 and still trades near there.