10-QPeriod: Q1 FY2024

SHERWIN WILLIAMS CO Quarterly Report for Q1 Ended Mar 31, 2024

Filed April 30, 2024For Securities:SHW

Summary

Sherwin-Williams Company (SHW) reported its first quarter 2024 results, showing a slight decrease in net sales to $5.37 billion from $5.44 billion in the prior year. Despite the top-line dip, diluted earnings per share saw a healthy increase of 7.1% to $1.97, driven by improved gross margins and effective cost management. The company's gross profit margin expanded to 47.2% from 44.5%, aided by moderating raw material costs. The company remains confident in its customer-focused strategy and is investing in growth initiatives, including new stores and innovation. While acknowledging macroeconomic uncertainties, Sherwin-Williams is encouraged by architectural demand heading into the second quarter, which is typically the stronger painting season. The company maintained a strong liquidity position with $179.9 million in cash and substantial unused capacity under its credit facilities.

Financial Highlights

53 data points
Beta

Revenue

$5.37B

47.2% Gross Margin

Net Income

$505.20M

9.4% Net Margin

EPS (Diluted)

$1.97

Total Assets

$23.43B

Cash & Equivalents

$179.90M

Free Cash Flow

-$58.90M

Financial Statements
Beta
Revenue$5.37B
Cost of Revenue$2.84B
Gross Profit$2.53B
SG&A Expenses$1.80B
Operating Income$884.30M
Interest Expense$103.00M
Net Income$505.20M
EPS (Basic)$2.00
EPS (Diluted)$1.97
Shares Outstanding (Basic)252.50M
Shares Outstanding (Diluted)255.80M

Key Highlights

  • 1Consolidated net sales decreased slightly by 1.4% to $5.37 billion for the first quarter of 2024 compared to $5.44 billion in the same period last year.
  • 2Diluted net income per share increased by 7.1% to $1.97, up from $1.84 in the first quarter of 2023.
  • 3Gross profit margin improved significantly to 47.2% from 44.5%, driven by moderating raw material costs.
  • 4Selling, general, and administrative (SG&A) expenses increased by $106.8 million, primarily due to investments in growth strategies and higher employee-related costs.
  • 5Net operating cash used was $58.9 million, primarily due to seasonal working capital increases, and was funded by an increase in short-term borrowings.
  • 6The company returned $728.0 million to shareholders through dividends and share repurchases in the first quarter.
  • 7Sherwin-Williams maintains a strong liquidity position with $179.9 million in cash and $2.445 billion in unused credit facility capacity.

Frequently Asked Questions

The increase in diluted earnings per share was primarily driven by an improvement in gross profit margin, which rose to 47.2% from 44.5%. This was due to moderating raw material costs, partially offset by lower sales volumes in certain segments. Additionally, while SG&A expenses increased, overall expense management and income tax rate changes contributed to the bottom-line growth.

The Paint Stores Group's net sales were approximately flat, showing a 0.5% increase. The Consumer Brands Group experienced a 7.1% decrease in net sales, largely due to volume declines and prior year divestitures. The Performance Coatings Group also saw a slight decrease of 1.6% in net sales, primarily due to lower sales volumes in North America and Latin America.

Sherwin-Williams remains confident in its customer-focused strategy and is encouraged by architectural demand as the painting season begins. Key growth initiatives include investments in new stores, sales and technical personnel, innovation, and digital capabilities. The company also continues to pursue strategic acquisitions and remains committed to returning value to shareholders through dividends and share repurchases.

The company reported total debt outstanding of $10.735 billion at March 31, 2024. Despite the debt level, liquidity remains strong with $179.9 million in cash and cash equivalents and $2.445 billion in unused capacity under its credit facilities. The company is also in compliance with its financial covenants.