Shareholders might have noticed that The Sherwin-Williams Company (NYSE:SHW) filed its annual result this time last week. The early response was not positive, with shares down 5.5% to US$692 in the past week. Sherwin-Williams reported in line with analyst predictions, delivering revenues of US$18b and statutory earnings per share of US$22.08, suggesting the business is executing well and in line with its plan. This is an important time for investors, as they can track a company’s performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. Readers will be glad to know we’ve aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Sherwin-Williams after the latest results.
See our latest analysis for Sherwin-Williams
Following the latest results, Sherwin-Williams’ 21 analysts are now forecasting revenues of US$19.4b in 2021. This would be a reasonable 5.7% improvement in sales compared to the last 12 months. Statutory earnings per share are predicted to grow 10% to US$24.71. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$19.1b and earnings per share (EPS) of US$24.22 in 2021. So the consensus seems to have become somewhat more optimistic on Sherwin-Williams’ earnings potential following these results.
There’s been no major changes to the consensus price target of US$774, suggesting that the improved earnings per share outlook is not enough to have a long-term positive impact on the stock’s valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on Sherwin-Williams, with the most bullish analyst valuing it at US$875 and the most bearish at US$400 per share. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.
Of course, another way to look at these forecasts is to place them into context against the industry itself. It’s pretty clear that there is an expectation that Sherwin-Williams’ revenue growth will slow down substantially, with revenues next year expected to grow 5.7%, compared to a historical growth rate of 11% over the past five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 5.5% next year. Factoring in the forecast slowdown in growth, it looks like Sherwin-Williams is forecast to grow at about the same rate as the wider industry.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Sherwin-Williams’ earnings potential next year. They also reconfirmed their revenue estimates, with the company predicted to grow at about the same rate as the wider industry. The consensus price target held steady at US$774, with the latest estimates not enough to have an impact on their price targets.
With that said, the long-term trajectory of the company’s earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Sherwin-Williams going out to 2025, and you can see them free on our platform here..
However, before you get too enthused, we’ve discovered 1 warning sign for Sherwin-Williams that you should be aware of.
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