Earnings from Sherwin-Williams and Stryker

We had two earnings reports today. Before the opening bell, Sherwin-Williams (SHW) reported Q1 earnings of $3.60 per share. That was below estimates of $3.69 per share. Sales rose 1.9% to $4.04 billion. Importantly, the company didn’t alter its full-year outlook of $20.40 to $21.40, which excludes acquisition costs. That compares with $18.53 per share a year ago. For Q2, Sherwin expects sales to rise by 2% to 5%. For the full year, they expect sales to rise by 4% to 7%.

Commenting on the first quarter, John G. Morikis, Chairman and Chief Executive Officer, said, “We made good progress on our pricing initiatives across all segments during the quarter and effectively managed SG&A spending, but volumes fell short of expectations due to a slower start to the architectural painting season in North America and continued challenging conditions in many end markets outside North America. Despite the volume shortfall and higher year-over-year raw material costs, consolidated Company adjusted gross margin, which excludes acquisition-related costs, improved sequentially and was flat year-over-year. We expect the positive trend in gross margin and operating expense control to continue as the year progresses, and volume growth should also improve over the balance of the year, particularly in the back half.

“Looking at our performance by segment, in The Americas Group, despite a strong backlog and project pipeline reported by many of our professional customers, volume growth in the quarter was slower than expected. We continued to invest by opening 15 net new store locations in The Americas Group during the quarter. In our Consumer Brands Group, most of the softness in demand in the quarter was in markets outside North America. Consumer Brands Group adjusted segment operating margin in the first quarter expanded sequentially and year-over-year, and we are very well positioned across all North American retail channels heading into the important spring selling season. Performance Coatings Group achieved modest sales growth and increased adjusted segment operating margin in the quarter against year-over-year raw material pressure.

Shares of SHW looked like they were going to drop on Tuesday, but the shares closed higher by 1.9% on the day.

Stryker (SYK) reported Q1 earnings of $1.88 per share, which beat the Street by four cents per share. That’s an increase of 11.9% over last year. Net sales rose 8.5% to $3.5 billion, and organic net sales increased by 7.3%. For the quarter, Stryker’s adjusted operating margin was 25.1%.

Based on our first quarter performance we now expect 2019 organic net sales growth to be in the range of 6.8% to 7.5% and expect adjusted net earnings per diluted share to be in the range of $8.05 to $8.20.

For the second quarter we expect adjusted net earnings per diluted share to be in the range of $1.90 to $1.95.

If foreign currency exchange rates hold near current levels, we expect net sales in the second quarter will be negatively impacted by approximately 1.5% and full year will be negatively impacted by approximately 1.0%, and net earnings per diluted share will be negatively impacted by $0.01 to $0.03 in the second quarter and negatively impacted by $0.05 to $0.10 in the full year.

Stryker raised the low end of 2019 guidance by five cents per share. Wall Street had been expecting $1.96 per share for Q2, and $8.13 per share for the entire year.

Posted by on April 23rd, 2019 at 6:13 pm


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