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Sherwin-Williams Reins in Outlook

Tuesday, December 16, 2014

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Paving the way for a tempered fourth-quarter report, Sherwin-Williams has unveiled a conservative update to its 2014 earnings forecast and a mixed look at 2015.

A day after reaping a big bounce from its newly inked architectural deal with HGTV and Lowe's, the company released an updated earnings guidance that will fall short of analysts' expectations, both NASDAQ and Investor's Business Daily (IBD) reported.

The new guidance, released Friday (Dec. 12), adds a nickel per share to the lower end of the company's 2014 outlook. The new estimate of $8.75 to $8.80 improves on the $7.26 of 2013, but missed analysts' mark by a penny.

Projected 2014 sales of $11.10 billion, though higher than 2013, will also miss Wall Street targets, IBD reported.

HGTV HOME
HGTV HOME

Start-up costs for Sherwin-Williams' new HGTV HOME collection will impact the earnings in the fourth quarter and next year, the company said.

"Consensus of 22 analysts polled by Thomson Reuters was for $8.81 EPS on revenue of $11.18 billion," NASDAQ reported. "Sherwin-Williams guidance pointed to fourth-quarter earnings of $1.35 per share. Analysts were expecting $1.39."

Sherwin-Williams raised its earnings outlook earlier this year.
 
The 2014 Picture
 
The company cited several factors working against its bottom line in 2014, including:
  • The expectation that its Comex paint stores acquisition "will negatively impact" share price by 28 cents; and
  • Start-up expenses related to a new line of HGTV HOME-branded collection of interior and exterior paints that Sherwin-Williams will be launching through the Lowe's home-improvement chain in March.

Those expenses, the company said, exceeded the $21 million settlement that Sherwin-Williams expects to receive in the fourth quarter as part of an antitrust action launched in 2010 against titanium dioxide suppliers.

Looking Ahead

The year 2015 will present a mixed bag, Sherwin-Williams said.

Comex
Comex

The 2013 acquisition of Comex's North American stores "will negatively impact" share price by 28 cents.

For the full year, the company expects consolidated net sales to increase by seven to 11 percent over 2014, with a share price between $10.65 and $10.85.

Sherwin-Williams expects the new HGTV HOME program to increase sales "by a low single digit percentage" in 2015 and "be modestly accretive" to its share price.

The company's stock rose Thursday on news of the HGTV HOME deal, but fell again after Friday's announcement. Still, its stock remains on IBD's Top 50 list of companies with "top fundamentals showing strong relative price strength in the market."

Sherwin-Williams is expected to release its fourth-quarter and full-year 2014 earnings on Jan. 28.

A webcast of the company's conference call to discuss Friday's report is available here.

   

Tagged categories: Coating Materials; Earnings reports; Economy; Exterior Wall Coatings; Interior Wall Coatings; Lowe's; North America; Paint and Coating Sales; Sherwin-Williams

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