Why Sherwin-Williams Shares Sank

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Sherwin-Williams (NYSE: SHW  ) sank as low as 10% today after the paint specialist announced disappointing second-quarter results and said that its bid to acquire a Mexican company was rejected by antitrust regulators. 

So what: The stock has soared over the past year on solid earnings growth, but today's second-quarter miss -- adjusted EPS of $2.54 on revenue of $2.7 billion versus the consensus of $2.57 and $2.76 billion -- is forcing analysts to scale back their expectations a bit. Additionally, the decision by Mexican regulators to reject Sherman's planned $2.3 billion purchase of paint company Consorcio Comex puts another little dent into its growth prospects going forward.

Now what: Management backed its full-year EPS guidance of $7.45-$7.55 per share and expects sales to grow in the mid-single digits. "Our Global Finishes Group continues to improve its operating margins through improved operating efficiencies and good cost control," said Chairman and CEO Christopher Connor. "The Latin America Coatings Group is managing to improve its core operating margins through selling price increases and good cost control despite the difficult environment in which they are operating." More important, with the stock now off about 15% from its 52-week highs, Mr. Market might be offering a decent opportunity to buy into that bullishness.

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  • Report this Comment On July 18, 2013, at 4:11 PM, statsarestats wrote:

    Can't believe Sherman was turned down on the acquisition. Wilma would be rolling over in her grave.

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