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Here's Why You Should Retain Sherwin-Williams (SHW) Stock Now

Sherwin-Williams (SHW) will likely gain from favorable demand in domestic markets and cost-control initiatives. It continues to focus on expanding ret...

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This story originally appeared on Zacks

The Sherwin-Williams Company SHW is expected to gain from favorable demand in domestic markets and cost-control initiatives, despite headwinds from raw material cost inflation and the Wattyl divestiture.

- Zacks

Sherwin-Williams’ shares have gained 34.2% in the past year compared with 27.8% rally of the industry.

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Let’s discuss why this Zacks Rank #3 (Hold) stock is worth retaining at the moment.

What’s Aiding SHW?

Sherwin-Williams is benefiting from favorable demand in domestic markets and remains committed toward expanding its retail operations. It is witnessing higher architectural sales across all professional end markets, driven by residential repaint, commercial and property maintenance as well as selling price increases. It is also seeing higher sales in Performance Coatings Group, driven by higher sales volumes in all end markets served and increase in selling prices.

The company is focused on capturing a larger share of its end-markets, as is evident from increasing number of retail stores. It plans to add around 80 new stores in 2021 in the United States and Canada.

Sherwin-Williams’ cost-control initiatives, working capital reductions, supply chain optimization and productivity improvement is expected to yield margin benefits. Robust working capital management and efforts to cut operating costs has enabled the company to generate strong net cash flows from operations.

A Few Concerns

Sherwin-Williams faces headwinds from raw material cost inflation in 2021, exacerbated by disruptions from winter storm Uri. The company now expects raw material costs to be up in the mid-teens on a year-over-year basis this year, a considerable rise from its prior view. It anticipates raw material inflation to continue in the third quarter. Raw material inflation had a negative impact on the company’s performance in the last reported quarter.

The Wattyl divestiture is also expected to affect sales in third-quarter 2021. The divestment is expected to hurt sales in the Consumer Brands unit in the quarter.

 

Stocks to Consider

Some better-ranked stocks in the basic materials space are Nucor Corporation NUE, Dow Inc. DOW and Cabot Corporation CBT.

Nucor has a projected earnings growth rate of around 494% for the current year. The company’s shares have soared 156.7% in a year. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Dow has an expected earnings growth rate of around 403.01% for the current year. The company’s shares have gained 38.2% in the past year. It currently holds a Zacks Rank #2 (Buy).

Cabot has an expected earnings growth rate of around 138.5% for the current fiscal. The company’s shares have rallied 37.2% in the past year. It currently carries a Zacks Rank #2.



5 Stocks Set to Double

Each was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2021. Previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

Today, See These 5 Potential Home Runs >>



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The SherwinWilliams Company (SHW): Free Stock Analysis Report

 

Nucor Corporation (NUE): Free Stock Analysis Report

 

Dow Inc. (DOW): Free Stock Analysis Report

 

Cabot Corporation (CBT): Free Stock Analysis Report

 

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