Summary
Sherwin-Williams Co. (SHW) reported a strong third quarter and a solid nine-month performance for the period ending September 29, 2013. The company demonstrated robust sales growth, driven primarily by increased paint sales volume in its Paint Stores Group. This top-line expansion, coupled with improved operating efficiencies and strategic pricing, led to a notable increase in gross profit margins for both the quarter and the year-to-date period. The company also highlighted a healthy increase in net income and diluted earnings per share, despite facing some headwinds such as increased interest expenses and a higher effective income tax rate. Financially, Sherwin-Williams maintained a strong liquidity position, with a significant increase in cash and cash equivalents and a reduction in short-term borrowings. The company continued to invest in its business through capital expenditures and strategic acquisitions, including the notable, though still pending, acquisition of Consorcio Comex, S.A. de C.V.'s U.S./Canada business. Investors should note ongoing discussions regarding significant legal proceedings, particularly those related to lead pigment and lead-based paint litigation, which, while not currently accrued for, represent a potential long-term risk. Overall, the report indicates a company performing well operationally and financially, with strategic growth initiatives underway.
Financial Highlights
51 data points| Revenue | $2.85B |
| Cost of Revenue | $1.55B |
| Gross Profit | $1.30B |
| SG&A Expenses | $889.69M |
| Operating Income | $475.97M |
| Interest Expense | $15.39M |
| Net Income | $262.97M |
| EPS (Basic) | $0.87 |
| EPS (Diluted) | $0.85 |
| Shares Outstanding (Basic) | 301.38M |
| Shares Outstanding (Diluted) | 307.87M |
Key Highlights
- 1Net sales increased by 9.4% in Q3 2013 and 5.7% for the first nine months of 2013, driven by higher paint sales volume, particularly in the Paint Stores Group.
- 2Gross profit margin improved to 45.5% in Q3 and 45.2% year-to-date, up from 44.2% and 43.9% respectively in the prior year, reflecting increased volume, efficiency, and pricing.
- 3Diluted net income per common share rose to $2.55 in Q3 and $6.11 year-to-date, compared to $2.24 and $5.37 respectively in the prior year periods.
- 4Cash and cash equivalents significantly increased by $173.1 million in the first nine months of 2013, contributing to a strong liquidity position.
- 5The company completed the acquisition of Comex's U.S./Canada business and is still pursuing the Mexico business, indicating strategic growth through M&A.
- 6Effective income tax rate increased to 32.1% for Q3 and year-to-date 2013, compared to 31.5% and 30.8% in the prior year, impacting net income.
- 7The company continues to face significant legal proceedings related to lead pigment and lead-based paint litigation, for which no amounts have been accrued.