Supply chain disruptions and inflationary pressure on margins are taking a toll on businesses across the globe.
Citing these as challenges, paints and coatings manufacturer Sherwin-Williams Company (SHW) lowered its financial guidance twice over the past month. I maintain a Neutral outlook on SHW stock. (See Sherwin-Williams Company stock charts on TipRanks)
Sherwin-Williams earlier projected a high-single-digit to low-double-digit percentage growth in its revenues for 2021. However, it now expects its revenues to increase by a high single-digit percentage in 2021.
Also, Sherwin-Williams reduced its 2021 earnings outlook as the company doesn’t expect the issues related to the raw materials and high costs to subside soon.
In response to the guidance cut, Sherwin-Williams CEO, John G. Morikis, stated that supply issues are unlikely to improve in Q4, as expected earlier.
However, the company continues to invest in growth initiatives, and Morikis does not expect “these near-term challenges” to hurt the company’s “longer-term momentum.”
Citing strong demand, Laurence Alexander of Jefferies said that Sherwin-Williams “will continue to manage pricing as needed to mitigate rising costs.” He added that “With underlying fundamental demand trends intact and price increases underway, we expect a recovery in earnings in 2022.”
However, Alexander trimmed his 2021 earnings estimate to $8.45 per share from $8.75. He maintained a Hold rating on the stock with a price target of $302 (8% upside potential).
Notably, the two back-to-back guidance cut has led to a decline in Sherwin-Williams stock prices over the past month. However, investors’ confidence remained intact.
TipRanks’ Stock Investors tool indicates that investors who hold portfolios on TipRanks currently have a Very Positive outlook on Sherwin-Williams stock, with 4.8% of investors who hold portfolios on TipRanks increasing their exposure over the past month.
Furthermore, on TipRanks, SHW stock has an analyst rating consensus of Strong Buy, based on nine Buys and three Holds. The average Sherwin-Williams Company price target of $320.08 implies 14.4% upside potential to current levels.
Disclosure: On the date of publication, Amit Singh had no position in any of the companies discussed in this article.
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