Sherwin-Williams defies coronavirus fears and maintains first quarter 2020 outlook
Sherwin-Williams ( SHW -2.27% ) has just done the unexpected: defy market fears of massive supply disruptions due to the COVID-19 pandemic and maintain its outlook for the first quarter of 2020. This encouraging news from Sherwin-Williams comes at a time where his rival Home deposit and key business partners like walmart (WMT -0.83% ) are reduce store opening hours to prevent the spread of the virus. Sherwin-Williams primarily sells paints and coatings through its own specialty stores, but also has longstanding partnerships with consumer discretionary chains like Walmart and Lowe’s.
Sherwin-Williams shares have lost nearly 28% in value over the past month, at the time of this writing.
Why Sherwin-Williams isn’t worried about the coronavirus
In late January, Sherwin-Williams guided 2% to 5% year-over-year growth in net sales for the first quarter, driven by strong demand from architectural and industrial markets. The company just reaffirmed its forecast and, in fact, said sales for its Americas Group segment were “above the high end.”
The Americas Group generates the bulk of Sherwin-Williams’ revenue, consisting of more than 4,700 company-owned paint stores and contributing nearly 57% of the company’s net sales in 2019. In fact, the contribution of the segment is much higher considering that 57% of Sherwin-Williams Consumer Brands Group sales were cross-segment and through the Americas Group last year.
In its latest statement, Sherwin-Williams said that while facing headwinds from the coronavirus pandemic, particularly outside the United States, the company has so far experienced “minimal” disruption to its business. supply chain and continues to operate the majority of its paint stores in North America. .
What does this mean for investors
Sales growth of 5% or more for its core segment is great news for shareholders in these depressing times. More importantly, as the company said in its statement, “While near-term market conditions will likely remain unpredictable, we believe that the underlying fundamentals of our long-term demand remain intact and we remain focused on providing value-added solutions to ensure our customers’ continued success.”
This “long-term” view is what investors should keep in mind when Sherwin-Williams releases its first-quarter results on April 29. In January, the company reported 2020 earnings of $19.91 to $20.71 per share, up from $16.49 in 2019.
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