SHERWIN WILLIAMS CO (SHW) Q2 2025 Earnings Summary

Executive Summary

• Q2 2025 revenue was $6.31B (+0.7% YoY) with gross margin up 60 bps to 49.4%, but EPS declined on higher SG&A tied to accelerated restructuring ($59M pre-tax) and faster-than-expected new HQ/R&D transition costs (~$40M pre-tax) .
• Against S&P Global consensus, revenue was in line/slightly above, but “Primary EPS” missed materially; management cut FY25 EPS guidance and now expects consolidated net sales to be up or down low-single digits for FY25 .
• Paint Stores Group (PSG) grew low-single digits with mid-single digit price and low-single digit volume decline; residential repaint and protective & marine remained bright spots, while CBG underperformed on soft DIY and FX, and PCG margin compressed on mix and FX losses .
• Management doubled the restructuring program (~$105M pre-tax, ~$80M annual savings) and cut 2025 capex by ~$170M (to ~$730M) to balance “softer-for-longer” demand and fund targeted growth in PSG; raw materials are now expected flat for 2025 with modest H2 deflation, but tariffs remain a variable .
• Near-term stock catalysts: guidance reset, restructuring acceleration, capex cut, and management’s framing of a “once-in-a-career” share gain opportunity amid competitor disruption .

What Went Well and What Went Wrong

What Went Well

• PSG delivered growth with high-single digit increases in protective & marine and mid-single digit growth in residential repaint; price realization exceeded expectations and gross margin expanded for the 12th straight quarter .
• Management accelerated decisive cost actions (restructuring doubled to ~$105M pre-tax) expected to save ~$80M annually; SG&A growth is guided to low-single digits for the year despite targeted investments in PSG .
• Packaging within PCG posted double-digit growth inclusive of an acquisition; Europe/Asia/LatAm grew in PCG even as North America lagged .

What Went Wrong

• Consumer Brands Group (CBG) sales fell 4.1% YoY on soft North American DIY and ~2% FX headwind in LatAm; segment margin compressed (reported 20.3%, adjusted 22.4%) and supply chain inefficiencies emerged from reduced production volumes .
• PCG adjusted margin fell to 16.8% (from 19.4%) on mix, higher non-operating costs (FX losses), and the absence of a prior-year asset sale gain; North America was weak .
• EPS declined (GAAP $3.00; adjusted $3.38) on elevated non-operating costs ($75M), pulled-forward building costs ($40M pre-tax), and restructuring; guidance was reduced amid “softer-for-longer” demand .

Financial Results

Consolidated performance (oldest → newest)

Q2 2025 actual vs consensus (S&P Global) and qualitative surprise

*Values retrieved from S&P Global.

Non-GAAP adjustments (Q2 2025)

• GAAP diluted EPS $3.00 includes $0.20 amortization and $0.18 restructuring; adjusted diluted EPS $3.38 .

Segment detail (Q2 2025 vs Q2 2024)

KPIs and operating stats

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “We are at a major inflection point in the North American architectural coatings industry… we refuse to miss this once-in-a-career opportunity” —Heidi Petz .
• “We are going broader and deeper in our restructuring initiatives… more than doubling our full-year target to approximately $105 million… expect savings of approximately $80 million on an annual basis” —Heidi Petz .
• “We are reducing our CapEx spending for the year by $170 million… to $730 million, inclusive of $300 million for our building project” —Heidi Petz .
• “We now expect slight deflation of our raw material basket in the back half of the year, resulting in flattish full-year costs” —Heidi Petz .
• “Non-operating costs were a headwind of approximately $75 million… [and] approximately $40 million of pre-tax transition and related costs in the quarter [for buildings]” —Heidi Petz .

Q&A Highlights

• Demand outlook: Management expects continued turbulence with particular caution in new residential, coil (tariffs), and DIY; share gains remain a focus despite macro .
• SG&A/building costs cadence: Pulled-forward building costs reduce H2 SG&A burden; H2 SG&A growth guided to just 1–2% as restructuring savings kick in .
• CapEx reprioritization: Cut to $730M while preserving strategic capacity projects (stateside architectural, coil expansion, warehouse automation) and accelerating the building transition .
• Raw materials and pricing: Expect H2 RM tailwind (solvents/resins) with tariff-related pressure in applicators/packaging/pigments; competitor price hikes noted in-season; SHW maintains value-based pricing .
• Segment specifics: Residential repaint backlogs stable with modest bid activity; PCG margin headwinds include FX and lack of prior-year gains; auto-refinish pressured by lower insurance claims but new account wins are strong .

Estimates Context

• Q2 2025 Actual vs S&P Global consensus: Revenue $6.31B vs $6.294B* (slight beat); Primary EPS $3.38 vs $3.806* (miss). Drivers of EPS shortfall include ~$75M non-operating headwinds, ~$40M pulled-forward building costs and $59M restructuring pre-tax .
• Forward-looking (context): Company guided Q3 2025 sales up/down low-single digit and reduced FY25 EPS ranges.
  *Values retrieved from S&P Global.

Key Takeaways for Investors

• Quality mix: PSG is outperforming in higher-quality professional channels (repaint, protective & marine), supporting margin resiliency even as volume is soft; continued store/reps expansion underpins share gains .
• Near-term EPS pressure is largely self-inflicted to position for share capture: accelerated restructuring and building transition costs weighed on Q2 and led to guidance cuts, but should yield ~$80M run-rate savings and faster building benefits .
• CBG/PCG remain the swing factors: DIY softness and supply chain inefficiencies in CBG plus mix/FX in PCG weigh on consolidated margins; stabilization there would drive upside .
• Cost backdrop is improving incrementally: RM basket now expected flat for 2025 with modest H2 relief; price realization remains disciplined, and competitor price actions could be supportive .
• Capital deployment pivots to discipline: CapEx trimmed ~$170M to protect FCF while continuing targeted capacity and automation; company returned $1.27B to shareholders YTD through H1 .
• 2H setup: Expect softer volume, tighter SG&A control, and restructuring savings to partially offset; watch for PSG momentum, CBG/PCG stabilization, tariff developments, and building cost cadence .

Appendix: Additional Q2 2025 items

• Dividend: $0.79 per share declared July 16, 2025 (payable Sep 5 to holders of record Aug 15) .