Sherwin-Williams stock jumps 7% after profit beat offsets sales shortfall

By Ciara Linnane

Paint company's profit beat comes amid continued choppiness in overall demand environment

Sherwin-Williams Co.'s stock jumped 7% Tuesday, after the paint company's better-than-expected second-quarter profit offset a sales miss.

Cleveland, Ohio-based Sherwin-Williams posted net income of $889.9 million, or $3.50 a share, for the quarter, up from $793.7 million, or $3.07 a share, in the year-earlier period.

Adjusted per-share earnings came to $3.70, well ahead of the $3.49 FactSet consensus.

Sales rose to $6.272 billion from $6.241 billion a year ago, below the $6.331 billion FactSet consensus.

Same-store sales rose 2.4%, while FactSet was expecting a 2% gain.

"Paint Stores Group sales were up, at the midpoint of our guidance, against a double-digit comparison," CEO Heidi Petz said in prepared remarks. "Volume increased by a low-single digit percentage, and price realization increased from first quarter levels as expected."

The company is now seeing a return on last year's investment in residential repaint, where volume rose by a mid-single digit percentage in a down market, she added.

It's also encouraged by growth in new residential, which is expected to continue in the second half as single-family housing starts turn to completions.

Consumer brands group rales were hurt by soft demand in North America do-it-yourself home improvement.

"Lower volume, the impact of the China architectural divestiture and unfavorable currency translation were partially offset by selling price increases, primarily in Latin America," Petz told analysts on the company's call, according to a FactSet transcript.

"Inflation, depleted savings and household debt also continue to pressure consumers who currently appear to be spending their modest available discretionary dollars elsewhere," she added. "We understand where we are in this cycle and eventually expect to see an upturn in DIY demand."

Performance coatings group sales were led by growth in industrial wood and coil. Auto refinish sales rose by low-single digits in North America, which was offset by softness in Latin America.

Packaging sales fell less than expected and general industrial demand was soft in all regions, said Petz.

"Despite the continued choppiness in the overall demand environment, all three of our reportable segments delivered sequential and year-over-year margin improvement," she said.

The company is now expecting third-quarter and full-year sales to grow by a low-single digit percent.

It expects full-year adjusted EPS to range from $11.10 to $11.40, while FactSet is expecting EPS of $11.37.

The stock has gained 11% in the year to date, while the S&P 500 has gained 16.7%.

-Ciara Linnane

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

07-23-24 1448ET

Copyright (c) 2024 Dow Jones & Company, Inc.