QUOTE AND NEWS
Forbes  5 hrs ago  Comment 
Wall Street is expecting higher profit for Sherwin-Williams when the company reports its third quarter results on Tuesday, October 28, 2014. The consensus estimate is calling for profit of $3.18 a share, a rise from $2.68 per share a year...
Jutia Group  Oct 23  Comment 
[PR Newswire] - CLEVELAND, Oct. 23, 2014 /PRNewswire/ -- The Board of Directors of The Sherwin-Williams Company (NYSE: SHW) today announced a regular quarterly dividend of $0.55 per common share, payable on December 5, ... Read more on this. The...
SeekingAlpha  Oct 14  Comment 
By Sure Dividend: PPG Industries (NYSE:PPG) is the global leader in the coatings industry. Sherwin-Williams (NYSE:SHW) is third globally, but is the industry leader in the U.S. Both businesses are Dividend Aristocrats with a long history of...
Motley Fool  Sep 24  Comment 
Dividend aristocrats are some of the most reliable stocks available today. However, Sherwin Williams may not be as shareholder friendly as it would have you believe.
Market Intelligence Center  Sep 24  Comment 
Sherwin-Williams Co (SHW) traded between $218.40 and $219.95 before closing at $218.48 Tuesday and presents some attractive trading opportunities today. MarketIntelligenceCenter.com’s algorithms have picked a Mar. '15 $210.00 covered call for a...
SeekingAlpha  Sep 23  Comment 
By Renu Singh: Strength in the construction and industrial markets has driven Sherwin-Williams (NYSE:SHW) to 52-week highs this year. The company, which supplies paints and coatings to several end-markets has appreciated more than 20% this year....
SeekingAlpha  Sep 17  Comment 
By Sure Dividend: In part 2 of the 54 part Dividend Aristocrats in Focus series, we will look into the operations of Sherwin-Williams (NYSE:SHW). Sherwin-Williams has been in business since 1866, and has increased its dividend each year since...
SeekingAlpha  Sep 7  Comment 
By Mark Kowalski: Sherwin-Williams (NYSE:SHW) has had a heck of a year. Since a slump early in the year following a Santa Clara County court ruling against the company for damages in the lead paint case, the stock price has climbed to its highest...
Motley Fool  Aug 28  Comment 
The paint maker hasn't had to whitewash its ability to overcome challenging economic conditions in continuing a years-long meteoric rise to record highs
SeekingAlpha  Aug 20  Comment 
By SA Editor Miriam Metzinger: Stocks discussed on the Lightning Round segment of Jim Cramer's Mad Money Program, Tuesday August 19. Bullish Calls: St Jude Medical (NYSE:STJ): "It has the best new products. It is a buy." EOG Resources...




 

Sherwin-Williams Company (NYSE:SHW) is the largest U.S. producer of architectural coatings(house paint) by revenue. The company also produces paint and finishes for automobiles and planes. SHW sells its products domestically and internationally through its own retail stores and through third party distributors. Store expansion has played an important role in SHW's revenue growth over the past few years. In fiscal 2010, SHW opened 35 new branches in the world, totaling to 564 company-operated branches.[1]

SHW sells premium (e.g. high priced) paints to professional painters and has benefited from the growth of its core market as homeowners have increasingly moved away from do-it-yourself paint jobs, in favor of hiring professional painters. Conversely, the company remains exposed to fluctuations in the U.S. housing market. Existing home sales are directly correlated with home improvements, including paint jobs.

Business Financials

SHW has three business segments: the Paint Stores Group, the Consumer Group and the Global Group:

  • The Paint Stores Group consists of 3,390 company-operated specialty paint stores in North America as of fiscal 2010.[2] This division sells Sherwin-Williams branded paint products to end use customers, from professional contractors to homeowners.[3] This segment of the business accounts for most of their revenues and profits, as seen in the chart below.
  • The Consumer Group distributes Sherwin-Williams branded paint and other products to third party customers such as mass merchandisers, home centers, independent paint dealers, hardware stores and automotive retailers, among others, for resale to end use customers.[4]
  • The Global Finishes Group sells Sherwin-Williams branded paint, coatings, and related products internationally through 564 company-operated architectural, automotive, industrial and chemical coatings branches with distribution in more than 30 countries worldwide, primarily in Europe, South America, and Asia.[5]

FY2010 (Ended December 31, 2010)

  • Revenue up 9.6% to $7,776.42 million USD compared to FY2009.
  • Net income up 6.1% to $462.49 million USD compared to FY2009.

Q1 FY2011 Earnings Summary

  • Revenue up 19% to $1.86 billion from same quarter FY2010.
  • Net income up more than double to $68. million from same quarter FY2010.

Key Trends and Forces

Because New Homes often Require Painting, U.S. Housing Market Weakness Directly Affects SHW's Sales

A significant decrease in the quantity of homes sold results in a decrease in touch-up painting by the seller and remodeling painting by the new resident. Whenever a home is sold, there is usually some remodeling involved, and this remodeling will usually involve some form of repainting. Statistics show that a homeowner who has been in a place for 5 years makes an average of only 0.5 paint transactions per year, while a resident who has been there for 2 years or less makes an average of over 7 times that number.

On the other hand, as U.S. demographics have shifted towards more dual-income families, families have found professional paint jobs to be more affordable, while finding themselves with less time for Do-It-Yourself (DIY) projects has . Over the past 30 years the market share of professionals in the residential paint market has grown from 40% to 60%.[6] SHW is well positioned to capitalize on this trend, because its paint stores target the professional user. Additionally, professional users are more likely to buy the high quality (i.e. high priced) paint produced by Sherwin-Williams, and they are more brand loyal than the more price consumer. Most of SHW sales are to professional painters, so this trend has a large positive effect on their total revenue and profitability. In contrast, competitor Masco sells primarily to DIY customers in their kiosks in Home Depot.

SHW Intends to Capture China's Paint Market, the World's Second Largest

SHW has announced plans its intention to capture up to 60% of the Chinese paint market, the second largest market for paint products in the world. [7]. The company opened several factories in the country dedicated to producing finishes for the Chinese market, and within three years the company opened its first franchise store in Shanghai. Since then, it has grown its number of stores rapidly. The company's growing exposure to China and other international destinations, has been instrumental in helping the company to weather the downturn in the U.S. housing market.

Competition

The U.S. coatings market can be split into two major segments, the architectural coatings market and the industrial and commercial coatings market. Architectural coatings include interior and exterior paints stains and varnishes, etc.; Industrial and commercial coating includes auto and other industrial coating. SHW produces in both markets, but mostly in the architectural one, and has different competitors in each.

The Architectural Coatings Market

The architectural coatings market accounts for about 45% of the total coatings market. Sherwin-Williams is by far the largest producer in this market. Its revenues of 7.8 billion dwarf its closest competitors ICI, Benjamin Moore and Masco.

  • ICI: ICI was bought out by Akzo Nobel. They both distribute their products to large retailers and openbjbajrate 450 of their own retail stores in the U.S..[8]
  • Benjamin Moore: Benjamin Moore is a privately held company; both ICI and Benjamin Moore have estimated architectural coatings revenues of around $1.5 billion. Benjamin Moore operates about 1,200 signature stores in the U.S..[9]
  • Masco: Masco, notable for its line of Behr paints, had net sales of $1.629 billion from its "Decorative Architectural Products" business segment. Masco sells primarily to the DIY market with kiosks in all 2200+ Home Depot stores nationwide.

The Industrial and Commercial Coatings Market

Sherwin-Williams is a small player in this segment of the coatings market, which is largely dominated by the large chemical corporations such as Akzo Nobel, DuPont, and PPG. This segment accounts for only about 8% of Sherwin-Williams' yearly sales. [citation needed]



Footnotes

  1. Sherwin-Williams 2010 Form 10-K, Page 2]
  2. SHW 2010 Annual Report Pg 2
  3. Sherwin-Williams 2009 Form 10-K, Page 5
  4. Sherwin-Williams 2009 Form 10-K, Page 2
  5. Sherwin-Williams 2009 Form 10-K, Page 7
  6. Bharat Book Bureau, "World Architectural Paints to 2009"
  7. [http://www.tmcnet.com/usubmit/2006/08/22/1823320.htm Sherwin Williams to Open First Franchised Store in China August 22, 2006
  8. ICI Paints Stores, "About ICI Paints"
  9. Benjamin Moore, "About Us: The Ultimate Retail Experience"
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