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    SHERWIN WILLIAMS (SHW)

    Q3 2024 Earnings Summary

    Reported on Jan 28, 2025 (Before Market Open)
    Pre-Earnings Price$381.75Last close (Oct 21, 2024)
    Post-Earnings Price$378.89Open (Oct 22, 2024)
    Price Change
    $-2.86(-0.75%)
    • Strong growth in the Packaging segment: Sherwin-Williams reported that Q3 sales in Packaging were up high single digits, driven entirely by volume, with volume up low double digits. The company expects very strong performance in the fourth quarter leading into next year, supported by the expansion of their Tournus France plant and the acquisition of Henkel's metal packaging business. These strategic moves position them well for industry changes like the upcoming EFSA ban on BPA. ,
    • Strategic investments leading to market share gains: The company is capitalizing on a unique moment in the industry by investing ahead of the curve while competitors are distracted. Sherwin-Williams focuses on being consistent, reliable, and dependable, which is attracting customers and leading to share gains, particularly in Refinish and Residential Repaint, where they've seen the fifth consecutive quarter of mid-single-digit growth in a flat market. , , ,
    • Well-positioned for anticipated demand recovery: Anticipating an improvement in remodeling demand as indicators like LIRA begin to rise, Sherwin-Williams is confident that its proactive investments and customer-focused solutions will allow it to outperform the market when demand becomes more robust. ,
    • Challenges in the Refinish business due to lower insurance claims, down double digits in North America, impacting sales and masking share gains. Management is not satisfied with year-to-date numbers.
    • Continued softness in the DIY market is negatively affecting the Consumer Brands Group, with sales decreasing by high single digits. The market remains weak due to pressure from inflation and existing home sales.
    • Increased SG&A expenses are constraining margins in the Paint Stores Group, with segment margin decreasing to 24.5%, due to higher investments in growth initiatives and unfavorable mix.
    MetricPeriodGuidanceActualPerformance
    Consolidated Sales
    Q3 2024
    Up a low single-digit percentage
    6,162.5 million USD, up from 6,116.7 million USD in Q3 2023
    Met
    Paint Stores Group Sales
    Q3 2024
    Unchanged
    3,650.2 million USD vs. 3,537.1 million USD in Q3 2023 (≈ +3.2% YoY)
    Beat
    Performance Coatings Group Sales
    Q3 2024
    Unchanged
    1,720.0 million USD vs. 1,724.2 million USD in Q3 2023 (≈ −0.24% YoY)
    Met
    Consumer Brands Group Sales
    Q3 2024
    Reduced
    790.5 million USD vs. 854.8 million USD in Q3 2023 (≈ −7.53% YoY)
    Met
    1. Pricing Dynamics & Outlook
      Q: What are the pricing dynamics for 2024 and 2025?
      A: SHW announced a 5% price increase, effective January 6. This aims to offset higher feedstock costs, wage inflation, and significantly higher healthcare expenses. They expect to achieve 50% to 60% price realization, influenced by timing of national account contracts and competitive dynamics.

    2. SG&A Investments & Margins
      Q: How will SG&A spend impact margins and growth?
      A: SHW increased SG&A in Q3 to invest in long-term strategies and widen their competitive moat. They are confident these investments will yield returns and view this as the ideal time to invest ahead of market recovery. SG&A is expected to moderate next year, with an eye on operating margin expansion as volumes grow.

    3. Competitive Landscape & Market Share
      Q: What are the opportunities from competitors' changes?
      A: SHW sees opportunities from competitors' shifts, such as PPG and Kelly-Moore. They focus on capturing quality sales in premium segments, not commodities. Kelly-Moore is viewed as a short-term share gain, while PPG represents a long-term opportunity. They're committed to earning and retaining valuable customers over time.

    4. Raw Materials Cost Trends
      Q: How are raw material costs impacting SHW?
      A: Raw materials were flattish year-over-year in Q3 and expected to remain so in Q4. Propylene costs increased almost 50% year-over-year due to supply outages. TiO2 supply is readily available with stable pricing. Overall, raw materials are expected to be down low single digits for the year.

    5. Remodeling Demand Outlook
      Q: What is the outlook for remodeling demand?
      A: SHW is optimistic about a resurgence in home renovation, aligning with their long-term view. Indicators like LIRA are expected to tick up in the second or third quarter of next year. They anticipate solid performance in their residential repaint business, benefiting from current investments.

    6. Impact of Hurricanes on Guidance
      Q: What is the hurricane impact on Q3 and Q4?
      A: Hurricanes reduced Q3 sales by less than one point and impacted earnings by about $0.05 per share. Recovery in Q4 is uncertain due to the time it takes customers to resume activities. This adds variability to their Q4 outlook.

    7. Refinish and Packaging Businesses
      Q: What is the outlook for Refinish and Packaging businesses?
      A: Refinish sales are down low single digits year-to-date, affected by double-digit declines in claims. SHW expects improving claims and share gains to be tailwinds next year. Packaging sales were up high single digits in Q3, with volume up low double digits. Strong performance is expected in Q4 and over the next 12 months.

    8. CapEx Guidance Explanation
      Q: What's happening with CapEx versus guidance?
      A: Year-to-date CapEx includes $415 million for new headquarters, with reimbursements reducing net CapEx to about $200 million. Core CapEx stands at $355 million, aligning with their guidance of $520 million, around 2% of sales.

    9. First Half 2025 Outlook
      Q: Is first half 2025 outlook a continuation of current trends?
      A: SHW expects the first half of next year to remain choppy, continuing the trends seen in the back half of 2024.

    10. SG&A Leverage Strategy
      Q: How is SHW thinking about SG&A leverage?
      A: SHW is managing SG&A tightly, focusing on selling investments that drive productivity and growth. They aim to achieve SG&A leverage as macro demand improves and volumes increase.

    11. Balancing Growth and Margins
      Q: How is SHW balancing investments and operating margin expansion?
      A: SHW focuses on driving operating margin by balancing gross margin expansion and prudent SG&A management. They invest strategically now to accelerate growth when demand returns, expecting higher operating margins in the future.

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