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Sherwin-Williams beats estimates on strong pricing, higher volumes in the Americas

Sherwin-Williams (SW) reported third-quarter net income up 36.4% year-on-year (YOY), to $685.1 million, on net sales up 17.5%, to $6.05 billion. Adjusted earnings totaled $2.83/share, ahead of analysts’ consensus estimate of $2.57/share, as reported by S&P Global Capital IQ. Margins expanded on a YOY basis during the quarter, as raw material availability improved, selling prices increased, and volumes grew in the Americas.

“Our margins improved as a result of pricing actions across all businesses and volume increases in all architectural paint end markets in the Americas group,” says SW chairman and CEO John Morikis. “We generated strong cash flow in the quarter, which enabled us to continue making strategic long-term investments across the business and pursue strategic, bolt-on acquisitions in the performance coatings Group, having closed three acquisitions since the beginning of the third quarter.”

Americas group segment sales rose 21.2% YOY, to $3.60 billion, while segment profit was up 21.0%, to $764.1 million. Higher architectural paint sales volumes and selling price increases more than offset higher raw material costs. A 10% price hike implemented in September is seeing “strong realization” in the segment, according to Morikis.

Performance coatings segment sales grew 13.7% YOY, to $1.74 billion, while segment profit more than doubled, to $236.2 million from $110.4 million. Volumes grew in most end markets, and selling price increases and acquisitions boosted sales and profits.

Consumer brands segment sales increased 8.5% YOY, to $701.9 million, while segment profit rose 25.2%, to $94.9 million. Selling price increases drove growth in sales and profits, partly offset by lower volumes outside North America and higher raw material and logistics costs.

SW has reaffirmed its full-year 2022 guidance, calling for adjusted earnings of $8.50-8.80/share and fourth-quarter sales to rise by a high-single-to-low-double digit percentage. “We expect the strong positive results we experienced in the third quarter to continue into the fourth quarter, driven by continued momentum in both the Americas group and North American industrial end markets, continued price realization, good cost control, and softer year-over-year comparisons,” Morikis says.

However, with macroeconomic uncertainty on the rise, SW is keeping an eye on costs. “Beginning in the fourth quarter, we will take actions to simplify our operating model and portfolio of products sold in the consumer brands group and weigh various options to implement appropriate cost reduction plans in all regions in the performance coatings group, the consumer brands group, and the administrative segments due to the continued uncertain demand outlook,” Morikis says. “The trajectory of raw material costs is trending favorably as we exit the year, although the pace and level of potential relief next year is difficult to project.”

Source: Sherwin-Williams

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