Sherwin-Williams Co. (SHW) recently posted third-quarter earnings of $1.50 per share, exceeding the consensus estimate by 18%. Sales climbed 3.3% to a record $2.269 billion. The company hiked its full-year earnings guidance, and analysts followed suit, boosting 2008 forecasts by 5% in just the past week.

Company Description

Sherwin-Williams Co. manufactures, develops, distributes and sells coatings and related products to professional, industrial, commercial, and retail customers. The company manufactures products under well-known brands such as Sherwin-Williams®, Dutch Boy®, Krylon®, Minwax®, Thompson’s® Water Seal®, and many more. With global headquarters in Cleveland, Ohio, Sherwin-Williams® branded products are sold exclusively through a chain of more than 3,000 company-operated stores and facilities, while the company’s other brands are sold through leading mass merchandisers, home centers, independent paint dealers, hardware stores, automotive retailers, and industrial distributors. The Sherwin-Williams Global Finishes Group distributes a wide range of products in more than 30 countries around the world.

Growth Reflected in Third-quarter Results

The company recently posted third-quarter earnings of $1.50 per share, exceeding the consensus estimate by 18%. Sales climbed 3.3% to a record $2.269 billion. The company hiked its full-year earnings guidance, and analysts followed suit, boosting 2008 forecasts by 5% in just the past week.

In fact, Wall Street’s view is a little more bullish than Sherwin-Williams’ outlook. Analysts boosted full-year 2008 earnings estimates to $4.26 per share from last week’s $4.07. For the following year, analysts increased forecasts to $4.42 per share from last week’s $4.40.

Sherwin-Williams’ higher full-year guidance ranges between $3.97 and $4.17 per share.

Commenting on the third quarter and first nine months results, Christopher M. Connor, Chairman and Chief Executive Officer, said, “We continue to manage our business through the challenging environment of the U.S. and global economies. We are experiencing an unprecedented downturn in the U.S. housing market that has severely depressed paint demand in the domestic new residential, residential repaint, DIY and commercial markets. During the third quarter, the strong paint demand we had enjoyed in many foreign markets began to subside and we anticipate increasing softness in the months ahead. Despite these conditions, we are pleased with the progress of our operating segments in producing record sales performance and strong cash generation.

More Signs of Growth

SHW’s earnings per share are expected to grow by 12% over the next 3 – 5 years, which is above the industry average of 9%. The company’s return on equity (ROE) of 38% also tops the industry average of 20%.

Solid Income

A few days before reporting, the company declared a regular quarterly dividend of 35 cents per share. SHW noted that the dividend is payable on December 5 to shareholders of record on November 14. The company is yielding 2.5%, which is in line with the industry.

Content Courtesy: Zacks Investment Research

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