APD Air Products and Chemicals Inc

Sherwin-Williams Co. (SHW) reported net earnings of $1.71 per share in the third quarter of 2011, beating the Zacks Consensus Estimate by a cent. 

Net sales for the quarter increased 14.4% year over year to $2.48 billion driven by acquisitions and selling price increases and strong organic sales growth by the Global Finishes Group. Sales were also boosted by favorable currency translation rate changes. Sherwin-Williams’ third-quarter sales exceeded the Zacks Revenue Estimate of $2.42 billion.

Cost of goods sold increased 20.5% to $1.45 billion in the quarter and expressed as a percentage of revenues, it increased to 58.2%. Gross profit surged 6.9% to $103.8 million.

Selling, general and administrative expenses were $760.2 million, an increase of 8.0% over $703.7 million in the prior-year quarter.

Performance by Segment

The Paint Stores Group posted net sales of $1.42 billion, up 10.2% from the year-ago period. The improvement was largely attributable to selling price increases and expanding domestic architectural paint sales volume across most segments. Segment profit increased 5.2% year over year to $236.9 million and as a percentage of net sales it decreased in the quarter to 16.7% from 17.5% last year.

Net sales of the Consumer Group inched up 3.3% from the same period last year to $351.6 million, primarily resulting from selling price increases, partially offset by the elimination of a portion of a paint program with a large retail customer. Segment profit decreased 31.3% to $41.0 million year over year mainly due to increasing raw material costs, partially offset by selling price increases and reductions in selling, general, and administrative expenses.

Net sales of the Global Finishes Group soared 31.2% to $714.4 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 $43.5 million, up 36.4% from $40 million recorded during the corresponding quarter of 2010. The progress was derived from increased paint sales volume and favorable foreign currency translation rate changes.

Share Repurchase

Sherwin-Williams acquired 2.64 million shares of its common stock through open market purchases in the quarter. The company had remaining authorization to purchase 1.51 million shares as of September 30, 2011. On October 19, 2011 the board of directors authorized the Company to purchase an additional 20 million shares of the company's stock for treasury purposes.

Outlook

For the fourth quarter of 2011, management anticipates consolidated net sales to increase 6% to 10% year over year. Diluted net income per common share for the fourth quarter is expected to be in the range of $(0.05) to $0.15 per share, including the one-time charge of $0.72 per share relating to the IRS settlement, compared with $0.67 per share in 2010.

For the full-year 2011, management expects consolidated net sales to increase above 2010 levels by a low teen percentage. With annual sales at that level, the company reaffirmed its full-year guidance for diluted net income per common share for 2011 at $4.65 to $4.85 per share before the IRS settlement and in the range of $3.93 to $4.13 per share after the settlement, compared with $4.21 per share earned in 2010.

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
 
Zacks Investment Research