Sherwin-Williams (SHW) Tops Q2 EPS by 7c, Revenues Beat; Boosts FY18 EPS Outlook Above Consensus
Sherwin-Williams (NYSE: SHW) reported Q2 EPS of $5.73, $0.07 better than the analyst estimate of $5.66. Revenue for the quarter came in at $4.77 billion versus the consensus estimate of $4.67 billion.
- Consolidated net sales increased 27.8% in the quarter to a record $4.77 billion; Valspar increased consolidated net sales $783.9 million, or 21.0%, in the quarter, as Valspar annualized June 1st
- Net sales from stores in U.S. and Canada open more than twelve calendar months increased 6.8% in the quarter
- Diluted net income per share increased 26.5% to $4.25 per share in the quarter, including charges of $1.23 per share for acquisition-related costs and $.25 per share related to environmental provisions, compared to $3.36 per share in the second quarter 2017
- Adjusted diluted net income per share, excluding acquisition-related costs and environmental provisions, increased 26.8% to a record $5.73 per share in the quarter compared to $4.52 per share in the second quarter 2017
- Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) from continuing operations increased 29.3% in the six months to $1.33 billion
- Raising FY18 adjusted EPS guidance to $19.05 to $19.35 per share, excluding acquisition-related costs and environmental provisions, compared to $15.07 per share on a comparable basis in FY17
Commenting on the second quarter, John G. Morikis, Chairman, President and Chief Executive Officer, said, "The Company posted record results in net sales, gross profit, and profit before taxes in the second quarter, aided by the Valspar acquisition which continues to build momentum. Consolidated earnings per share expanded by 26.8% percent in the quarter, excluding acquisition-related costs and environmental expense provisions impacts in both years. Underlying demand remained solid across most of our end market segments during the quarter. At the same time, raw material costs continued to inflate during the quarter at a rate slightly higher than anticipated. We continue to focus on offsetting these escalating costs by controlling spending and implementing price increases.
"All three operating segments delivered year-over-year improvement in net sales and profit. The Americas Group posted another strong quarter of volume growth and profit improvement. The Consumer Brands Group is executing well on its expanded partnership with one of its largest customers. The Performance Coatings Group had sales and volume growth across most of its businesses and improved their operating margin on good cost control and effective pricing actions. The Valspar acquisition passed the one year anniversary on June 1, 2018, and both the Consumer Brands and Performance Coatings Groups are ahead of schedule in integrating their respective businesses.
"For the third quarter, we anticipate our consolidated net sales will increase a mid-to-high single digit percentage compared to last year\'s third quarter. For the full year 2018, we expect our consolidated net sales will increase by a high teens to low twenty percentage, including incremental Valspar sales of $1.85 billion for the first five months of 2018, compared to the full year 2017. With annual sales at this level, we are updating our full year 2018 diluted net income per share to be in the range of $15.00 to $15.20 per share, including charges of $3.80 to $3.90 per share for acquisition-related costs and $.25 per share for environmental expense provisions. Diluted net income per share in 2017 was $18.67 per share, including a one-time benefit of $7.04 per share from deferred income tax reductions, a one-time charge of $.44 per share for discontinued operations and a charge of $3.00 per share for acquisition-related costs. We are raising our full year 2018 adjusted diluted net income per share to be in the range of $19.05 to $19.35 per share, excluding acquisition costs and environmental expense provisions, compared to $15.07 per share on a comparable basis in 2017. We now expect our 2018 effective tax rate to be in the low twenty percent range."
GUIDANCE:
Sherwin-Williams sees FY2018 EPS of $19.05-$19.35, versus the consensus of $18.82.
For earnings history and earnings-related data on Sherwin-Williams (SHW) click here.