Sherwin-Williams (SHW, Financial) cheered the market with its third quarter results with better than expected profits, while revenue was broadly in line with the estimates. The company benefitted from its acquisitions in the past years, which was backed by higher volume at its paint stores. As a result of its robust performance year over year, the stock jumped and is currently at its 52-week high.
A mix of positives and negatives
The company projected solid numbers for the quarter across various segments. In fact, management cites this result as the all-time records for consolidated sales, operating margins, net income and earnings per share for any quarter in the company's history. And it anticipates that the same momentum would continue in the coming months with the addition of around 80 to 90 new stores in 2014. Along with this the Comex integration is also well on track. These new additions will play significant part to enhance its top line.
However, there was a twist in its acquisition spree recently as the company cancelled the deal to acquire Comex’s Mexican operations. While acquiring Comex in 2012 the management hoped to double its sales in Latin America. Sherwin acquired its U.S and Canadian operations for $165 million but unfortunately its Mexican deal was blocked by regulators. This is a huge loss to Sherwin as it could have increased its earnings by around $1.5 a share.
However, the company is determined to rise above this loss and post some good numbers going forward. Apart from this, the other acquisitions are doing quite well and continues contributing to its top line. Moreover, the improving fundamentals of the economy are a yet another healthy sign for the company. Although financial markets doubt the resilience of the housing recovery, yet the management cites of an increasingly positive picture developing for its company.
Conclusion
Going forward, the company seems to be well on track to deliver year over growth. Also continuing with its efforts to deliver value to its share holders it repurchased two million shares in the open market. For the fourth quarter Sherwin anticipates its net sales to increase 6% to 8% on a year over year basis. And consequently the company expects its earnings to be in the range of $1.30 to $1.40 per share. The company had a strong performance during the quarter, which led its shares to soar high and considering its future prospects there could be more upside to this stock.
