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SHERWIN WILLIAMS CO 8-K Report, Financial Results (Apr 23, 2024)

Reports
Earnings & Results·Exhibits & Filings
Filing Date
Filed April 23, 2024
Period End
April 23, 2024
Security
SHW
In the record · 2016–202610-K1110-Q328-K145

SHW filed 11 annual reports (10-K), 32 quarterly reports (10-Q) and 145 current reports (8-K) between 2016 and 2026.

  1. Leadership change8-K · Jan ’18Jan ’18
  2. Leadership change8-K · Nov ’20Nov ’20
  3. Material agreement8-K · Oct ’22Oct ’22
  4. Material agreement8-K · Sep ’26Sep ’26

01—Abstract

Summary

Summary of the 8-K filed April 23, 2024. Cited figures are marked; the original filing is the authoritative source.

The Sherwin-Williams Company (SHW) reported first quarter 2024 results on April 23, 2024, with consolidated net sales down 1.4% to $5.37 billiona, driven mainly by lower volumes in the Consumer Brands Group (CBG) and the Performance Coatings Group (PCG) in North America.

Profitability was the bright spot: diluted EPS rose 7.1% to $1.97b, adjusted diluted EPS rose 6.4% to $2.17, and EBITDA grew 2.0% to $896.2 million (16.7% of sales). Income before taxes increased 4.1%, supported by moderating raw material costs, which offset continued investment in long-term growth initiatives and digital technologies. Gross margin expanded to 47.2% from 44.5%, though SG&A rose to 33.5% of sales from 31.1%.

By segment, the Paint Stores Group (PSG) was roughly flat with sales up 0.5% to $2.87 billionc, same-store sales were essentially flat (-0.1%), and segment margin fell to 17.2% from 18.4% due to growth investments and higher employee costs. Management noted soft North American DIY demand and delayed property maintenance capex, partly offset by growth in residential repaint and commercial work. CBG segment profit jumped 63.5% on lower raw material costs and better fixed-cost absorption, while PCG profit rose 8.6% with margin gains across the fifth consecutive quarter of year-over-year improvement.

Management reaffirmed full-year 2024 diluted EPS guidance of $10.05 to $10.55d (adjusted $10.85 to $11.35), and guided second-quarter net sales to flat to up low-single digits, with an update deferred to the July second-quarter report. Capital allocation remained active: the company repurchased $546 million of shares and raised its dividend 18.2%, returning $728.0 million to shareholders in the quarter.

Operating cash flow was negative $58.9 million on seasonal working capital build, funded by higher short-term borrowings. Total debt remains substantial, with long-term debt of $8.13 billion plus a $1.35 billion current portion, and the balance sheet reflects a larger property, plant and equipment base following acquisitions and capacity investments.

02—Key points

Key Highlights

  1. Net sales fell 1.4% to $5.37 billion, but PSG sales were flat and same-store sales were essentially unchanged (-0.1%).
  2. Diluted EPS rose 7.1% to $1.97; adjusted diluted EPS rose 6.4% to $2.17, helped by moderating raw material costs.
  3. EBITDA increased 2.0% to $896.2 million, or 16.7% of net sales; gross margin expanded to 47.2% from 44.5%.
  4. CBG segment profit surged 63.5% to $153.4 million, with reported segment margin of 18.9% versus 10.7% a year earlier.
  5. PSG segment margin compressed to 17.2% from 18.4% as growth investments and employee costs weighed on profit.
  6. Full-year 2024 EPS guidance reaffirmed at $10.05–$10.55 (adjusted $10.85–$11.35), including $0.80 per share of acquisition amortization.
  7. Returned $728.0 million to shareholders in Q1 ($546 million in buybacks and an 18.2% dividend increase), while operating cash flow was negative $58.9 million on seasonal working capital needs.

03—Questions

Frequently Asked Questions

  1. Why did sales decline even though earnings grew?

    Consolidated net sales fell 1.4% mainly because of lower volumes in Consumer Brands Group (including the prior-year China architectural divestiture) and in North American Performance Coatings. Earnings grew because raw material costs moderated and manufacturing and distribution fixed-cost absorption improved, which lifted gross margin by about 270 basis points.

  2. Is the company's full-year 2024 outlook changing?

    No. Management reaffirmed full-year diluted EPS guidance of $10.05–$10.55 and adjusted EPS guidance of $10.85–$11.35, and expects full-year net sales to rise a low to mid-single-digit percentage. It guided second-quarter net sales to flat to up low-single digits and plans to update full-year guidance with its July second-quarter results.

  3. What is driving the weakness in the Paint Stores Group?

    PSG sales were flat, with same-store sales essentially unchanged. Growth in Residential Repaint, Commercial and Protective & Marine was offset by declines in New Residential and Property Maintenance, where delayed capital projects hurt demand. Segment margin also fell to 17.2% from 18.4% due to continued investment in growth strategies and higher employee-related costs.

  4. How is the company returning capital to shareholders, and can it sustain that pace?

    In Q1 2024 it repurchased about $546 million of stock (1.7 million shares total returned with dividends) and raised its dividend 18.2%, returning $728.0 million in total. Because Q1 operating cash flow was negative $58.9 million, the payout was funded partly by short-term borrowings, so sustaining this pace will depend on stronger cash generation as the seasonal painting season progresses. Net debt remains elevated, with roughly $9.5 billion in total long-term debt including the current portion.

04—Continue

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