Sherwin-Williams Beats Estimates - Analyst Blog
April 21 2011 - 2:35PM
Zacks
Sherwin-Williams
Co. (SHW) reported net earnings of 63
cents per share in the first quarter of 2011, more than double of
30 cents per share in the year-ago period and up 11 cents from the
Zacks Consensus Estimate of 52 cents. The first quarter earnings
also whizzed past the company’s guided range of 48 cents to 58
cents per share.
Net sales for the quarter
increased 19% year over year to $1.85 billion driven by
acquisitions and selling price increases. Sherwin-Williams’ first
quarter sales also exceeded the Zacks Revenue Estimate of $1.82
billion.
Cost of goods sold
increased 21% to $1.06 billion in the quarter and expressed as a
percentage of revenues, it increased 120 basis points to 57%. Gross
profit surged 15% to $797.4 million while gross margin dipped 120
basis points year-over-year to 43%.
Selling, general and
administrative expenses were $691.1 million, a 13% climb over
$612.9 million in the prior-year quarter. Operating income upped
34% to $106.3 million and operating margin expanded 60 basis points
year-over-year to 5.7% in the quarter.
Performance by
Segment
The Paint Stores Group
posted net sales of $929.3 million, up 9% from $850.9 million in
the year-ago period. The improvement was largely attributed to
selling price increases and expanding domestic architectural paint
sales to residential repaint contractors and do-it-yourself
customers and improving protective and marine product sales.
Segment profit increased 44% year over year to $68.8 million driven
by selling price increases, partially offset by raw material cost
inflation.
Net sales of the Consumer
Group inched up 1% from the same period last year to $294.9 million
due to selling price increases and the timing of seasonal shipments
to some customers partially offset by the elimination of a portion
of a paint program with a large retail customer. Segment profit
rose 10% to $41.1 million year over year mainly because of the cost
saving initiatives undertaken by the company and selling price
increases partially offset by increasing raw material costs.
Net sales of the Global
Finishes Group soared 50% to $630.2 million in the quarter as a
result of acquisitions, higher paint sales volume, selling price
increases and favorable currency translation rate changes.
The segment’s profit was $36.8 million, up 60% from $23
million recorded during the corresponding quarter of 2010. The
progress was derived from increased paint sales volume and expense
control.
Financial
Position
Sherwin-Williams had cash
of $53.9 million as of March 31, 2011 compared with $58.6 million
as of December 31, 2010. During the quarter, the company acquired
1.1 million shares of its common stock through open market
purchases. Sherwin-Williams had an authorization of 4.65 million
shares remaining under the share repurchase program.
Outlook
Management expects net
sales to increase in the range of 8% to 13% compared to second
quarter 2010. The company expects EPS to lie in the range of $1.65
to $1.75 per share for the quarter.
For full year 2011,
management expects net sales to increase above 2010 levels by a
high single digit percentage. Alongside, the company reiterated its
full year 2011 net earnings guidance range of $4.65 to $5.05 per
share.
Our
Take
Each of the business
divisions of Sherwin-Williams has reaped benefits and will continue
to do so, backed by the improving domestic and international
markets, rising product prices, successful acquisitions along with
the company’s cost reduction efforts. However, higher raw material
prices remain a concern. We currently have a Zacks #3 Rank
(short-term Hold recommendation) on the stock.
Based in Cleveland, Ohio,
Sherwin-Williams is a developer, manufacturer, distributor and
seller of paints, coatings, industrial and marine products,
original equipment manufacturer product finishes and related items,
and automotive finishes and refinish products in North and South
America, Europe, and Asia. The company’s key competitors
include PPG Industries
Inc. (PPG),
The
Valspar Corporation (VAL) and
Air
Products and Chemicals Inc. (APD).
AIR PRODS & CHE (APD): Free Stock Analysis Report
PPG INDS INC (PPG): Free Stock Analysis Report
SHERWIN WILLIAM (SHW): Free Stock Analysis Report
VALSPAR CORP (VAL): Free Stock Analysis Report
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