It appears last quarter's homebuilding challenges didn't mean a permanent stain on Sherwin-Williams'
Total sales for the quarter only improved a couple of percent, but diluted earnings grew more than 14% because management was able to boost gross margins and finally beat back the "significant rise in raw material costs during 2004, 2005 and 2006." A couple of minor acquisitions also helped offset weakness in the consumer group, as do-it-yourself painters and retail clients are indeed being hit by subprime worries and plummeting new-home construction that is hitting homebuilders such as Pulte
Strong international numbers -- especially in automotive paint in South America -- also helped bolster anemic trends here at home, and Sherwin-Williams introduced new products in the U.K. Overall, management is positive enough to brush aside the homebuilding issues for the time being, increasing full-year earnings guidance to $4.60 to $4.70, or as much as 12% year-over-year growth.
You have to commend management for ably navigating the tough residential housing environment, and the stock just hit a 52-week high on the second-quarter strength. The only potential drag on the shares is renewed interest from a number of states in pursuing lead-paint litigation against Sherwin-Williams and NL Industries
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