Sherwin-Williams Cuts Guidance on Acquistion Costs

By Imani Moise

Sherwin-Williams Co.'s $9.3-billion takeover of fellow paint-maker Valspar isn't going as smoothly as planned.

Shares in Sherwin-Williams tumbled 5.1% to $341.3 Thursday morning as the company cut its full-year earnings outlook by more than a dollar and said integration costs would be over six times more expensive than previously anticipated.

The company now expects a $2.50 per-share charge for the year related to the acquisition, compared with a prior estimate of a 40-cent per-share charge. The updated cost estimate is about three times the expected gains from the acquisition for the year.

Sherwin-Williams now sees annual earnings of $12.30 to $12.70 a share, down from $13.65 to $13.85 a share forecast in April. Analysts polled by Thomson Reuters were expecting $14.76 per share.

The deal, originally announced in March of last year, gave Sherwin another brand and more access to do-it-yourself painters, who tend to buy their supplies at big retailers rather than at the contractor-oriented stores owned by Sherwin. Valspar is particularly strong at Lowe's and Ace Hardware stores while Sherwin has traditionally relied heavily on its own stores for paint sales.

In its first quarterly report including Valspar, Sherwin-Williams topped sales views but missed on earnings. For the second quarter the Ohio-based company reported earnings of $319.1 million, or $3.36 per share, down from $378.1 million, or $3.99 per share, a year earlier. Revenue rose 16% to $3.74 billion. Excluding certain items related to the acquisition, earnings rose to $3.80 per share.

Analysts were expecting per-share earnings of $4.57 on $3.67 billion in sales.

Also Thursday, rival paint-maker PPG Industries Inc. said it had a war-chest of up to $3.5 billion to finance acquisitions after its failed bid for Dutch paint group Akzo Nobel NV. PPG shares fell 5.6% to $107.20 during early trading.

Write to Imani Moise at imani.moise@wsj.com

(END) Dow Jones Newswires

July 20, 2017 11:38 ET (15:38 GMT)

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