Maybe I'm painting myself into a corner, but I'm not sure why the market reacted to Sherwin-Williams' (NYSE:SHW) earnings report the way it did yesterday.

Don't get me wrong. The paint specialist's efforts at cutting costs and turning a profit beyond analyst expectations took a special effort. With the housing market in the tank, generating sales to the commercial and consumer markets is no easy task, but considering the outlook for the industry for the rest of the year -- let alone the economy -- it's not a very bright palette that Sherwin-Williams has at its disposal.

I'll chalk up some of Sherwin's stock run-up to general market euphoria. PPG Industries (NYSE:PPG), the world's second-largest paint company, also beat expectations yesterday, and while PPG sees a potential rosier picture in the second quarter because of some seasonal demand, it admits that results will be far lower than what it has experienced in recent years. That's something Sherwin-Williams CEO Christopher Conner could agree with. He noted that the funk that domestic and foreign markets found themselves in caused "rapid deterioration" of its business and is likely to stretch through the first half of 2009.

Not that there weren't previous warnings. The paint giant warned at the end of the fourth quarter that the earliest point to expect an upturn would be in the back half of this year. Further, foreign-currency exchange rates that had served to boost results late last year were a black stain this time around. All of this makes the market's reaction yesterday all the more curious.

While Sherwin-Williams beat earnings expectations, revenues came up at the very tail end of guidance -- even after a handful of international acquisitions. Moreover, even as it reaffirmed its full-year earnings guidance of $3 to $4 per share, it said sales for the year were likely to decline much more steeply than it previously forecast. And when one looks at how housing is shaping up, it's easy to see why. New housing starts plummeted in March, and the downturn planted lots of egg on the faces of those who thought February's relatively robust numbers meant that the industry had turned a corner. And those earnings estimates for the year are painted with some pretty broad strokes.

Sherwin also trades at a bit of a premium to its rivals. PPG, Valspar (NYSE:VAL), and RPM International (NYSE:RPM) trade at an average of 14 times next year's earnings, while Sherwin-Williams is closer to 16 times. Of course, it just might deserve that higher valuation. Across gross, operating, and net margins, Sherwin-Williams presents a stronger position. Still, its immediate future is facing some stiff headwinds, and there isn't much confidence that it can continue to exceed industry norms -- or that the industry itself can command higher earnings multiples.

I like the Motley Fool Stock Advisor recommendation as a long-term investment, and I think that when the economy and housing markets turn, the company will emerge from the current malaise stronger. In addition to its namesake stores that cater to professional painting contractors, its presence in retail locations such as Wal-Mart (NYSE:WMT) means that its consumer segment will enjoy a resurgence as well. But at around $57 a share, the stock is priced as if we've already painted over the difficult times -- and that's a horse of a different color.