Homebuilding malaise and subprime scares are marring the once-shining performance of a variety of firms in the housing industry. Paint firm Sherwin-Williams
Sherwin-Williams reported a slight fall in first-quarter earnings when it reported results yesterday. Management cited tough conditions at its paint stores; do-it-yourself consumer, contractor, and builder demand has slowed in recent quarters. This trend mirrors slowing same-store sales trends at DIY giants Home Depot
Fellow Fool and resident homebuilding expert David Lee Smith expects the industry to weather the current storm, and Sherwin-Williams is still calling for 10% earnings growth in 2007 as trends at its global segment help offset domestic weakness. Sherwin also has a steady track record of impressive sales and earnings growth. Sales and earnings have respectively advanced 9% and 17% on average in each of the past five years, and operating cash flow has improved a respectable 7.8% over the same time frame.
In most cases, I'd recommend taking advantage of short-term industry woes to pick up company shares on the cheap, much like Philip Durell at Motley Fool Inside Value did with a recent pick of wall-board maker USG
However, Sherwin-Williams has bucked the trend, with shares rising almost 50% since last summer. Existing shareholders aren't complaining, but the increase may seem worse to prospective buyers, especially considering the lead-paint litigation uncertainty hovering over the company. At current levels, there may be better bargains out there for Fools shopping in the home-industry neighborhood.
For related Foolishness:
- Is It Time to Buy Subprime?
- The Definitive Boring Stock: Paint Edition
- Companies You Should Buy Right Now
- The Warren Buffett Mutual Fund
Fool contributor Ryan Fuhrmann is long shares of Lowe's and Home Depot but has no financial interest in any other company mentioned. Feel free to email him with feedback or to discuss any companies mentioned further. The Fool has an ironclad disclosure policy.