Sherwin-Williams (NYSE:SHW) is best known for its paint and coatings in the U.S., and with the housing market remaining favorable domestically, it seems natural to think that the company would be doing well. Yet conditions abroad are a lot different, and in many of its businesses, Sherwin-Williams has faced some struggles that have eaten into sales growth recently.

Coming into Tuesday's second-quarter financial report, Sherwin-Williams investors expected that the paint company would be able to keep generating solid growth. Sherwin-Williams' bottom-line results were even better than many had expected, and the company seems optimistic about its prospects for the remainder of the year and beyond.

Display case with paint swatches.

Image source: Sherwin-Williams.

Sherwin-Williams posts record results

Sherwin-Williams' second-quarter results were mixed in the eyes of many market participants. Revenue climbed 2.2% to $4.88 billion, which was a bit slower than the 3.5% growth rate that most of those following the stock wanted to see from the paint giant. Yet net income was higher by 17% to $471 million, and after accounting for some extraordinary items, adjusted earnings of $6.57 per share easily topped the consensus forecast among analysts for $6.37 per share.

Several of Sherwin-Williams' segments did especially well. In the Americas group, revenue climbed 5%, as higher paint sales in North American stores along with increases in selling prices were enough to offset currency-related pressure. Segment profit gained almost 7.5%, overcoming some cost pressures from raw material prices. Same-store sales growth of 4.3% accelerated from past quarters.

The paint company's consumer brands group also saw top-line growth, with sales climbing 3.4%. Price increases and the introduction of a new customer program helped lift results, and segment profit soared by more than half from year-ago levels.

However, the performance coatings group saw somewhat weaker performance. Sales were down 3.8%, as activity levels outside North America were sluggish at best. Sherwin-Williams did manage to boost profit by a modest 4% thanks to pricing power and cost controls, but currencies weighed on this segment especially hard.

CEO John Morikis talked about how the company dealt with obstacles to promote growth. "Sherwin-Williams delivered record results in net sales, [adjusted pre-tax operating earnings], profit before taxes, and net operating cash in the second quarter," Morikis said, "overcoming uneven demand in end markets outside the U.S. and persistently challenging selling conditions in North American architectural paint markets." The CEO noted that pricing initiatives and growth in North American paint stores were especially important in the company's success, as was margin improvement across the business.

What's ahead for Sherwin-Williams?

Sherwin-Williams fully expects that its efforts will keep gaining momentum. In particular, Morikis predicted that the improvement in gross margin that the paint specialist has seen should extend in the second half of 2019, as raw material prices should start to ease even as volume picks up.

Sherwin-Williams' guidance was largely consistent with what investors were expecting to see. In the third quarter, the company sees revenue rising by a low-single-digit percentage, with full-year revenue likely to rise 2% to 4% compared to 2018. Despite the better-than-expected earnings in the second quarter, Sherwin-Williams once again repeated its previous expectation that it will post adjusted earnings in a range between $20.40 and $21.40 per share for 2019.

Sherwin-Williams shareholders seemed to like what they saw in the report, and the stock was higher by almost 5% just after the market opened Tuesday morning following the announcement. Given how well Sherwin-Williams is doing despite the sluggishness in the global economy, it'll be interesting to see how much better the paint and coatings giant will do if macroeconomic conditions pick up around the world.

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