Sherwin Williams (SHW) beat “analyst” expectations by 23 cents a share or 18%.
– Sales increased 3.3% to a record $2.269 billion in 3Q08 and 2.1% to a record $6.280 billion in first nine months
– EPS was $1.50 in 3Q08; $.05 above the 3Q08 guidance range of $1.20 to $1.45
– Net operating cash in the first nine months was $592.6 million; an improvement of $28.8 million over the first nine months last year
– EPS guidance range of $.40 to $.60 for 4Q08 and raising full year guidance range to $3.97 to $4.17
All segments experienced sales increases:
* Net sales in the Paint Stores Group increased $9.5 million, or 0.7%, to $1.410 billion in the quarter and decreased $20.6 million, or 0.5%, to $3.797 billion in the first nine months. The sales increase in the quarter was due primarily to increased sales from acquisitions of 1.5% and selling price increases that were partly offset by sales volume reduction
* Net sales of the Consumer Group increased $6.2 million, or 1.8%, to $355.7 million in the quarter and decreased $20.8 million, or 2.0%, to $1.026 billion in the first nine months. The sales increase in the quarter was due primarily to selling price increases and an increase in sales of 0.4% related to a 2007 acquisition.
* The Global Finishes Group’s net sales stated in U.S. dollars increased $55.8 million, or 12.5%, to $500.8 million in the quarter and $170.1 million, or 13.3%, to $1.452 billion in the first nine months due primarily to volume gains, selling price increases, favorable currency translation rate changes and acquisitions.
The Company acquired 793,135 shares of its common stock through open market purchases during the quarter and 7.0 million shares during the first nine months. The Company had remaining authorization at September 30, 2008 to purchase 20.0 million shares.
CEO Christopher Connor said, “During the fourth quarter of 2008, we anticipate consolidated net sales growth, in percentage terms, will be plus or minus in the low single digits from last year’s fourth quarter. We expect diluted net income per common share for the fourth quarter will be in the range of $.40 to $.60 per share compared to $.80 per share last year. For the full year 2008, we anticipate consolidated net sales will be slightly higher than 2007. At that sales level, we are raising our expectations for diluted net income per common share for full year 2008 to a range of $3.97 to $4.17 per share compared to $4.70 per share earned in 2007.”
Would I be a buyer of Sherwin shares here? No. Not because they are not a great company or their shares are not undervalued, it is just that I think there are some extreme values out there currently and Sherwin is not an extreme value. The dividend yield at 2.8% is good, but again, far below the 7% at Dow Chemical (DOW), 6% at GE (GE) and 5.8% at Harley Davidson (HOG). Now, should share dip into the mid 40’s ($45) then I would have to take a close look.
Also, despite the title of the post, Sherwin is tied to housing and that is not going anywhere but flat or down for at least a year, maybe more. That being said, Sherwin’s results will remain stable due to fantastic management and it’s brilliantly timed international expansion so the downside from here is limited. Should shares be sitting here at these levels 6 months to a year from now, perhaps they then warrant a buy.
There are just to many truly magnificent bargains out there now…
Disclosure (“none” means no position):Long SHW, DOW, HOG, GE
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