Summary
Sherwin-Williams Company (SHW) reported its third-quarter and nine-month results for the period ending September 29, 2018. The company demonstrated robust sales growth, particularly in The Americas Group and Consumer Brands Group, driven by higher paint volume and strategic pricing initiatives. The acquisition of Valspar, completed in June 2017, continued to be a significant factor, contributing substantially to revenue growth, although it also increased amortization and interest expenses. Financially, SHW maintained strong operating cash flow, which improved year-over-year. The company also reported a significant legal expense related to California litigation, impacting quarterly earnings. Despite this, diluted earnings per share from continuing operations showed a positive trend compared to the prior year, reflecting the benefits of the Valspar integration and effective cost management, including achieved synergies and the adoption of new accounting standards. The company's balance sheet remained solid, with manageable debt levels relative to its capital structure.
Financial Highlights
54 data points| Revenue | $4.73B |
| Cost of Revenue | $2.72B |
| Gross Profit | $2.01B |
| SG&A Expenses | $1.27B |
| Operating Income | $766.55M |
| Interest Expense | $92.28M |
| Net Income | $354.00M |
| EPS (Basic) | $1.27 |
| EPS (Diluted) | $1.24 |
| Shares Outstanding (Basic) | 279.30M |
| Shares Outstanding (Diluted) | 285.41M |
Key Highlights
- 1Consolidated net sales increased by 5.0% to $4.73 billion in Q3 2018 and by 22.4% to $13.47 billion in the first nine months of 2018, largely driven by the Valspar acquisition and organic growth.
- 2The company recognized a $136.3 million expense for California litigation in Q3 2018, impacting net income and earnings per share.
- 3Diluted net income per common share from continuing operations increased to $3.72 in Q3 2018 and $10.59 in the first nine months of 2018, up from $3.33 and $9.23 respectively in the prior year.
- 4Operating cash flow improved, with net operating cash of $1.43 billion for the first nine months of 2018, up from $1.26 billion in the same period of 2017.
- 5Gross profit margin improved slightly to 42.5% in Q3 2018 from 42.2% in Q3 2017, driven by volume, pricing, and reduced purchase accounting impacts, partially offset by raw material cost increases.
- 6Selling, General, and Administrative (SG&A) expenses as a percentage of sales decreased to 26.9% in Q3 2018 from 29.0% in Q3 2017, reflecting realized synergies from the Valspar acquisition and adoption of new accounting standards.
- 7The company's debt levels decreased, with total debt at $9.67 billion at September 30, 2018, down from $10.95 billion at September 30, 2017, and as a percentage of total capitalization.