Paint firm and Motley Fool Stock Advisor pick Sherwin-Williams (NYSE: SHW) reported first-quarter earnings this morning. The numbers showed that the company continues to face an uphill battle, thanks to a tough domestic housing market. Total sales eked out a 1.5% gain, but earnings fell almost 23%. International trends again painted a much prettier picture for the quarter, but they weren't enough to help Sherwin brush aside industry woes at home.
Of Sherwin's three primary business segments, only its Global Group managed to post positive growth -- sales improved by 14.8%, and profits jumped by 21.7%. The Paint Stores segment struggled "due primarily to soft architectural paint sales" and saw a 1.9% sales drop; a 3.2% boost from acquisitions was easily offset by falling existing sales. The segment's total profits plummeted nearly 32%, thanks to a tough combination of lower sales and higher costs on raw materials. The Consumer Group was the top-line laggard, experiencing a 4.8% sales drop as profit fell a severe 24%, which was attributed to "soft DIY demand at most of the Segment's retail customers."
The fall in earnings wasn't pretty, but it came in ahead of analyst projections, as did sales. Sherwin is still firmly profitable and has been buying back its own shares, which served to soften the blow of the per-share profit decrease. But until domestic trends stabilize, stock performance will likely remain on the red side of the color scheme.
Lead-pigment litigation proceedings in Rhode Island and a few other states also continue to be an overhang on the company and rivals such as NL Industries (NYSE: NL). (DuPont (NYSE: DD) managed to settle with Rhode Island a while back.) Sherwin-Williams definitely has a couple of short-term issues to deal with, but the valuation has come down to a point where patient investors could see a pop in the share price on any positive news.
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