Sherwin-Williams Poised on Cost Actions & Expansion Moves
Zacks Investment Research | Apr 08, 2020 08:40AM ET
We issued an updated research report on The Sherwin-Williams Company (NYSE:SHW) industry .
Sherwin-Williams is witnessing strong demand in its domestic end-use markets and remains committed to expand its retail operations. In the fourth quarter of 2019, it saw higher sales and profits in the Americas Group segment, primarily owing to increased paint sales volume across most end markets. The company is benefiting from sustained strength in architectural paint markets in North America.
The company is also focused on capturing a larger share of its end-markets, as reflected by an increasing number of retail stores. The company added 62 net new stores in 2019 in its Americas Group unit. It plans to add 80-100 new stores in 2020.
Moreover, Sherwin-Williams’ cost control initiatives, working capital reductions, supply chain optimization and productivity improvement are yielding margin benefits. Working capital management and efforts to cut operating costs are also helping the company to generate strong cash flows. It generated strong net operating cash flows of $2.32 billion in 2019. The company is also taking appropriate pricing actions, which is lending support to its margins.
The company is also gaining from synergies of the Valspar acquisition. It realized benefits worth around $315 million from synergies in 2019.
However, Sherwin-Williams is exposed to challenges from soft demand outside of the United States. The company witnessed relatively weaker demand in non-domestic regions during the last reported quarter, especially in Asia and Europe. It is seeing pressure on its industrial wood business in China.
Softness in sales outside North America hurt sales in its Performance Coatings Group segment in the fourth quarter. Industrial demand remains sluggish in non-domestic markets, which may continue to affect sales in this unit.
The Sherwin-Williams Company Price and Consensus
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