Summary
The Sherwin-Williams Company (SHW) reported a solid second quarter and first half of 2019, demonstrating revenue growth and improved profitability. Net sales increased by 2.2% in the second quarter to $4.88 billion and 2.1% for the first half to $8.92 billion, driven by higher paint sales volume in North American stores, pricing increases, and a new customer program. Gross profit margin improved significantly to 44.7% in the quarter and 43.9% year-to-date, benefiting from higher sales and pricing, though partially offset by raw material cost increases. Diluted net income per share saw a healthy increase, reaching $5.03 for the second quarter and $7.65 for the first half, up from $4.25 and $6.86 respectively in the prior year periods. This growth was achieved despite various charges, including acquisition-related costs and a tax credit investment loss, highlighting underlying operational strength. The company's financial condition remains strong, with good cash flow from operations and ample borrowing capacity. Sherwin-Williams continues to manage its costs effectively, with SG&A expenses as a percentage of sales remaining stable or improving.
Financial Highlights
52 data points| Revenue | $4.88B |
| Cost of Revenue | $2.70B |
| Gross Profit | $2.18B |
| SG&A Expenses | $1.33B |
| Operating Income | $903.40M |
| Interest Expense | $89.20M |
| Net Income | $471.00M |
| EPS (Basic) | $1.71 |
| EPS (Diluted) | $1.68 |
| Shares Outstanding (Basic) | 275.33M |
| Shares Outstanding (Diluted) | 280.69M |
Key Highlights
- 1Consolidated net sales increased by 2.2% in Q2 2019 to $4.88 billion and by 2.1% for the first six months of 2019 to $8.92 billion.
- 2Gross profit margin improved to 44.7% in Q2 2019 and 43.9% for the first six months, up from 42.7% and 42.6% respectively in the prior year periods.
- 3Diluted net income per share increased to $5.03 in Q2 2019 and $7.65 for the first six months, compared to $4.25 and $6.86 respectively in the prior year.
- 4Operating cash flow improved significantly, with $758.0 million generated in the first six months of 2019, up from $579.1 million in the same period of 2018.
- 5The company adopted ASC 842 (Leases), resulting in the recognition of approximately $1.7 billion in operating lease right-of-use assets and related liabilities on the balance sheet as of June 30, 2019.
- 6A significant charge related to the reversal of net tax benefits from federal renewable energy tax credit funds (DC Solar) impacted the effective tax rate, increasing it to 30.3% in Q2 2019 and 26.5% year-to-date, compared to 25.0% and 22.3% in the prior year periods.
- 7The company reached an agreement in principle to resolve the California public nuisance litigation for a total payment of $305.0 million over six years, with Sherwin-Williams' share being approximately $101.7 million.