Sherwin Williams (SHW) posted results this mornings and more than a few people are going to be surprised.
Profit for the quarter slid to $171.7 million, or $1.45 per share, from $202.6 million, or $1.52 per share, in the same quarter last year. Revenue edged up about 1 percent to $2.23 billion from $2.2 billion. Analysts polled by Thomson Financial, on average, predicted a profit of $1.38 per share on revenue of $2.19 billion.
Sherwin-Williams said acquisitions and strong global results partly offset what Christopher M. Connor, company chairman and chief executive, called “an unprecedented downturn in the U.S. housing market that is both deep and wide.”
How well did the International Group do? Seven acquisitions completed after the second quarter of 2007 increased consolidated net sales 2.4% in the quarter and 2.5% in the first six months. Favorable currency translation rate changes increased consolidated net sales 1.1% in the quarter and 1.3% in the first six months.
Acquisitions and currency translation rate changes had a combined favorable impact on diluted net income per common share of approximately $.02 per share in the quarter.
The Global Group’s net sales stated in U.S. dollars increased $54.6 million, or 12.6%, to $488.9 million in the quarter and $114.3 million, or 13.7%, to $950.8 million in the first six months due primarily to volume gains, selling price increases, currency translation impact and acquisitions. Favorable currency translation rate changes increased net sales of the Global Group by 5.8% in the quarter and 6.3% in the first six months. Acquisitions increased this Group’s net sales in U.S. dollars by 3.8% in the quarter and 3.7% in the first six months.
This part really surprised me, domestic net sales in the Paint Stores Group decreased $10.4 million, or 0.8%, to $1.355 billion in the quarter and $30.2 million, or 1.2%, to $2.386 billion in the first six months due primarily to soft domestic architectural paint sales in the new residential, residential repaint, DIY and commercial markets as well as weak sales in non-paint categories. Acquisitions added 2.6% to this Group’s net sales in the quarter and 2.9% in the first six months. Net sales from stores open for more than twelve calendar months decreased 4.5% in the quarter and 5.4% in the first six months over last year’s comparable periods.
I would have expect a much greater decline. This really does bode very well for the eventual turn in housing. If we can see housing conditions not seen since the Depression, and only see a 4.5% sales decline, when housing normalizes, things will look just great.
The Company acquired 2.1 million shares of its common stock through open market purchases during the quarter and 6.2 million shares during the first six months. The Company had remaining authorization at June 30, 2008 to purchase 20.8 million shares.
Looking forward:
“During the third quarter of 2008, we anticipate consolidated net sales will be slightly below last year’s third quarter. We expect diluted net income per common share for the third quarter will be in the range of $1.20 to $1.45 per share compared to $1.55 per share last year. For the full year 2008, we are reaffirming our June 3, 2008 guidance that we anticipate consolidated net sales will be slightly lower than 2007. We are also reaffirming our June 3, 2008 guidance that we expect diluted net income per common share for full year 2008 will be in the range of $3.60 to $4.10 per share compared to $4.70 per share earned in 2007.” CEO Chris Connor
You know, great management always manages to steer through tough times and come out stronger. With lead litigation effectively behind it and results holding their own despite unprecedented conditions, Connor is doing just that with Sherwin.
Disclosure (“none” means no position):Long SHW
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