The housing market has been doing quite well, and even the threat of higher interest rates hasn't appeared to dampen the rally in real estate. Sherwin-Williams (NYSE:SHW) relies on homeowners to drive its paint business, and the good conditions in the housing industry have helped send the company's stock higher.

Coming into Thursday's first-quarter financial report, Sherwin-Williams investors wanted to see continued growth, but even they were pleasantly surprised by the extent to which the paint giant boosted its business over the past three months. Let's look more closely at Sherwin-Williams to see how it did and what lies ahead in the future.

Dragon made out of paint chips.

Image source: Sherwin-Williams.

Sherwin-Williams starts 2017 strong

Sherwin-Williams' first-quarter results looked extremely favorable. Sales climbed more than 7% to $2.76 billion, which was faster than the roughly 5.5% growth that most investors were looking to see. Net income did even better, soaring 45% to $239.2 million and producing earnings of $2.53 per share. That easily topped the consensus forecast of $2.05 per share among those who follow the paint stock.

Yet interestingly, Sherwin-Williams' numbers show varying levels of performance among the company's various segments. The paint stores group was extremely strong, seeing net sales climb more than 12% from the previous year's quarter. Sherwin-Williams attributed the gains to several favorable factors, including better sales volume of architectural paint, increases in selling prices, and a change in the way the company classifies its revenue. Comparable-store sales jumped 7.5%, accelerating from the pace in previous quarters, and the segment's profit climbed by a fifth.

In contrast, the consumer group segment suffered some setbacks. Revenue fell 11% as sales volume declined, and profit was down slightly from year-earlier levels. Sherwin-Williams claimed a small victory by reducing overhead expenses, but poor demand from the company's retail and commercial customers took a toll on the segment.

Elsewhere, the global finishes group saw its results climb modestly, with a 4% rise in sales and segment profit gaining 8%. The Latin America coatings group got a boost from strong foreign currencies, posting a 13% rise in revenue and reversing a year-ago loss to a small profit of $1.2 million.

Sherwin-Williams CEO John Morikis saw all of his business making progress toward better performance. Morikis attributed record results to "the continued positive sales volume and strong operating results of our paint stores group and operating margin improvement in our global finishes group." The CEO believes that all of its units are working hard to control expenses while boosting prices where appropriate to maximize profit and offset rising raw materials costs.

What's ahead for Sherwin-Williams?

Looking forward, Sherwin-Williams also expressed its optimism about its future. The company opened 10 new stores during the quarter, and it boosted its dividend for the 39th straight year.

Yet the biggest question concerns Sherwin-Williams' planned merger with Valspar (NYSE:VAL). Earlier in April, the two companies agreed to sell assets from Valspar's North American industrial wood coatings business to Axalta for $420 million in cash. By doing so, Sherwin-Williams and Valspar believe that they can meet concerns that the U.S. Federal Trade Commission and the Canadian Competition Bureau might have had regarding the merger.

Sherwin-Williams' guidance for the second quarter was also strong. The company expects earnings to be between $4.15 and $4.35 per share, and that figure includes a $0.25-per-share reduction due to costs of the Valspar acquisition. Sherwin-Williams boosted its full-year earnings guidance by $0.65 per share, with expectations now at $13.65 to $13.85 per share after reducing anticipated acquisition costs in total.

Sherwin-Williams investors appeared to be satisfied with the report, and the stock climbed toward all-time highs, rising 3.5% in pre-market trading following the announcement. With the Valspar acquisition apparently on track and solid fundamental conditions in the paint industry, Sherwin-Williams looks like it's doing everything it can to maximize the value of its business.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends Sherwin-Williams. The Motley Fool has a disclosure policy.