Sherwin-Williams Earnings: Residential Repaint Impresses but Industrial Markets Remain Constrained

Wide-moat Sherwin-Williams reported solid fourth-quarter results as residential repaint markets remained resilient. Net sales rose 1% year over year as gains in the company's paint stores group were somewhat offset by declines in the consumer brands and performance coatings segments. Consolidated operating margins expanded 100 basis points from a year ago as all three segments experienced margin expansion. We continue to be impressed by the strength of Sherwin's paint stores segment and the company's ability to drive price increases for architectural paint. While some headwinds in general industrial and automotive remain, we think Sherwin is set up well to capitalize on architectural coating demand this year. As such, we expect to raise our $242 fair value estimate a mid-single-digit percentage.