Sell Rating on Sherwin-Williams Amidst U.S. Housing Slowdown and Weak Architectural Coatings Demand

In a report released today, Steve Byrne from Bank of America Securities reiterated a Sell rating on Sherwin-Williams Company (SHW – Research Report), with a price target of $286.00.

Steve Byrne has given his Sell rating due to a combination of factors impacting the Sherwin-Williams Company’s prospects. He points out the persistent weakness in the U.S. architectural coatings demand, which is a significant concern given that approximately 70% of Sherwin-Williams’ sales are tied to this market, mostly within the U.S. The company’s recent quarterly results show a stagnation in revenue growth, which is attributed to the broader housing-related slowdown in the U.S. market. Byrne also notes the discrepancy between homeowner mortgage rates and current market mortgage rates, suggesting an ongoing challenge in the housing sector that could extend into 2024, potentially affecting Sherwin-Williams’ sales further.
Furthermore, although Sherwin-Williams is well-positioned to gain market share in the U.S. architectural segment due to contractor loyalty and its extensive store network, Byrne remains cautious. His analysis includes a lowered earnings per share (EPS) estimate for 2024, reflecting a slower recovery in the company’s Paint Stores. While he has slightly increased the valuation multiple, the price objective has been reduced. These adjustments stem from tempered expectations for a second-half recovery and the company’s high valuation compared to peers. Without clear signs of a positive turning point in the company’s performance or the housing market, Byrne maintains an Underperform rating for Sherwin-Williams.

Based on the recent corporate insider activity of 61 insiders, corporate insider sentiment is negative on the stock. This means that over the past quarter there has been an increase of insiders selling their shares of SHW in relation to earlier this year.

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Sherwin-Williams Company (SHW) Company Description:

Founded in 1866, Ohio-based The Sherwin-Williams Co. manufactures and sells paints, coatings and related products to professional, industrial, commercial, and retail customers. It operates through three segments including, The Americas Group, Consumer Brands Group, and Performance Coatings Group.