Sherwin-Williams (SHW) Lowers Q3 Outlook Amid Hurricanes

The Sherwin-Williams Company (NYSE: SHW) is updating its guidance for sales and earnings per share for the third quarter ending September 30, 2017, which was previously provided on July 20, 2017. This update reflects the impact of Hurricanes Harvey, Irma and Maria on Sherwin-Williams' operations in Texas, Florida, the Caribbean and neighboring areas and two earthquakes in Mexico. The Americas Group operates 706 paint stores in Texas, Florida and the Caribbean, and has 145 company-operated stores and 387 dedicated dealers in Mexico.

In the days surrounding Hurricanes Harvey, Irma and Maria, company-operated paint stores, manufacturing facilities and distribution centers in the affected regions suspended daily operations to ensure the safety of employees and comply with instructions of the local authorities. Based on a preliminary assessment, the short-term impact of these unprecedented events is expected to reduce revenues in The Americas Group by a range of $50-70 million in the third quarter. The Company expects third quarter sales and profit to be negatively impacted by the lost sales days, costs related to clean up and recovery efforts and tightened supply of propylene and ethylene based raw materials.

"Our thoughts and prayers are with the thousands of Sherwin-Williams employees and all those affected by these catastrophic natural disasters who have experienced loss," commented John G. Morikis, Chairman, President and Chief Executive Officer. "Efforts are well underway to provide relief and support to the affected communities. The majority of company-operated stores and facilities in these regions have reopened, and we have made tremendous efforts to quickly resume operations while supporting those in need during this difficult time.

"Due to the impact of the storms and earthquakes, we now anticipate Sherwin-Williams' core net sales in the third quarter will increase a low single digit percentage compared to the third quarter last year. The previous expectation for Sherwin-Williams' core net sales in the quarter had been a low to mid single digit percentage increase. Our expected incremental sales from the Valspar acquisition remain unchanged at approximately $1.0 billion in the third quarter. At that anticipated sales level, we are revising our expectation for diluted net income per common share in the third quarter to be in the range of $3.40 to $3.70 per share compared to our previous expectation of $3.70 to $4.10 per share and $4.08 per share earned in the third quarter 2016. This includes a $1.10 per share charge from costs associated with the Valspar acquisition, and includes an EPS increase of $.40 to $.60 per share from Valspar operations. The increase from Valspar operations includes an acquisition financing expense charge of $.40 per share in the third quarter. Third quarter 2016 earnings included a $.24 per share charge for acquisition-related costs.

(*** consensus is $4.96, which may not compare)

"While we are still assessing the longer term impact of these tragic events on our business, the sales momentum we are seeing across most geographies—particularly in our company-operated stores in the unaffected regions of the U.S. and Canada—should enable us to recover some of the third quarter earnings shortfall over the balance of the year. We will provide a full year 2017 outlook when we report 3Q17 earnings on October 24th."

Financial Community Presentation

Sherwin-Williams will host its annual Financial Community Presentation from the Marriott Marquis in New York City on October 3, 2017.

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