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Sherwin-Williams Co SHW

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Morningstar’s Analysis

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Economic Moat


Capital Allocation


Idle Hands and a Hot Housing Market Keep Sherwin Williams' Paint Flowing

Charles Gross Equity Analyst

Analyst Note

| Charles Gross |

Sherwin Williams' second-quarter sales slowdown proved remarkably brief. Despite elevated unemployment enrollment and reduced benefits, paint sales strengthened in the third quarter. In aggregate, sales and adjusted EBITDA rose 5.2% and 11.7%, respectively, from the prior year. Do-it-yourself painters were the star of the quarter, driving tremendous sales growth out of retail outlets like Lowe's. Given that the U.S. housing market has proven surprisingly resilient in 2020, we expect this year and next to yield hearty financial results for Sherwin Williams. Due to increased 2020 management guidance and time value of money effects, our fair value estimate rises to $380 per share from $360. Our narrow moat rating is unchanged. With shares trading at nearly $680 per share, or just under 19 times forward EBITDA, we view Sherwin Williams as significantly overvalued.

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Company Profile

Business Description

Sherwin-Williams is the largest provider of architectural paint in the United States. The company has approximately 4,800 stores and sells premium paint at higher price points than most competitors. Sherwin-Williams also sells paint-related products in big-box stores and provides coatings for original equipment manufacturers.

101 West Prospect Avenue
Cleveland, OH, 44115-1075
T +1 216 566-2000
Sector Basic Materials
Industry Specialty Chemicals
Most Recent Earnings Sep 30, 2020
Fiscal Year End Dec 31, 2020
Stock Type Cyclical
Employees 61,111