Sherwin-Williams as Inflation Hedge

From Barron’s:

Either way, prices are going higher—and Sherwin-Williams (SHW) should benefit. The paint manufacturer’s stock was little changed this past week after reporting a profit of $2.06 a share, well above forecasts for $1.64, on sales of $4.66 billion, topping expectations for $4.51 billion. But it was its comments on pricing that really caught investors’ attention.

“Our previously announced 3% to 4% price increase to U.S. and Canadian customers became effective Feb. 1, before the supply-chain disruption the industry began experiencing later in the quarter,” Sherwin-Williams CEO John George Morikis said on the company’s conference call this past Tuesday. “We likely will need to take further pricing actions if raw material costs remain at these elevated levels.”

Baird analyst Ghansham Panjabi, who rates Sherwin-Williams a Buy, notes that it is likely waiting to see just how much its costs rise so it doesn’t have to raise prices more than once more this year. If the company can raise prices without hurting sales, it can keep growing its profit margin even as input prices rise. Panjabi raised his price target on the stock to $300, up about 10% from Friday’s close of $273.87, calling it “the ultimate hedge toward inflation.”

Posted by on May 1st, 2021 at 5:05 pm


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