On July 23, 2024, Sherwin-Williams Co (SHW, Financial) released its 8-K filing for the second quarter ended June 30, 2024. Sherwin-Williams, the largest provider of architectural paint in the United States, operates over 5,000 stores and offers premium paint products. The company also sells paint-related products in big-box stores and provides coatings for original equipment manufacturers.
Quarterly Performance and Challenges
For Q2 2024, Sherwin-Williams Co (SHW, Financial) reported consolidated net sales of $6.27 billion, a slight increase of 0.5% compared to the same period last year. This figure fell short of the analyst estimate of $6.33 billion. However, the company exceeded earnings expectations with diluted net income per share rising 14.0% to $3.50, surpassing the estimated $3.40 per share.
Despite the modest revenue growth, the company faced challenges in its Consumer Brands Group due to soft DIY paint demand in North America and the impact of divesting its China architectural business in 2023. These factors were partially offset by higher sales volumes in the Paint Stores and Performance Coatings Groups.
Financial Achievements and Industry Impact
Sherwin-Williams Co (SHW, Financial) achieved a 12.1% increase in EBITDA to $1.44 billion, representing 22.9% of net sales. This growth was driven by moderating raw material costs and higher net sales. The company's ability to expand its gross margin and generate strong cash flow is crucial in the chemicals industry, where cost management and operational efficiency are key to maintaining profitability.
Income Statement Highlights
| Metric | Q2 2024 | Q2 2023 | $ Change | % Change |
|---|---|---|---|---|
| Net Sales | $6,271.5 million | $6,240.6 million | $30.9 million | 0.5% |
| Income Before Taxes | $1,173.4 million | $1,012.1 million | $161.3 million | 15.9% |
| Net Income Per Share - Diluted | $3.50 | $3.07 | $0.43 | 14.0% |
| Adjusted Net Income Per Share - Diluted | $3.70 | $3.29 | $0.41 | 12.5% |
Segment Performance
Paint Stores Group (PSG): Net sales increased by 3.5% to $3.62 billion, driven by low-single digit sales volume growth and higher selling prices. Segment profit rose by 6.8% to $907.1 million.
Consumer Brands Group (CBG): Net sales declined by 10.7% to $844.3 million due to soft DIY demand and the divestiture of the China business. However, segment profit surged by 85.3% to $204.4 million, aided by higher fixed cost absorption and moderating raw material costs.
Performance Coatings Group (PCG): Net sales saw a marginal increase of 0.6% to $1.81 billion, with segment profit rising by 10.6% to $301.5 million, driven by higher sales and lower raw material costs.
Liquidity and Cash Flow
Sherwin-Williams Co (SHW, Financial) generated $1.14 billion in net operating cash and returned $1.34 billion to shareholders through dividends and share repurchases in the first half of 2024. The company has authorization to purchase an additional 36.5 million shares.
Guidance and Outlook
The company has updated its full-year 2024 guidance, expecting diluted net income per share to range between $10.30 and $10.60, and adjusted diluted net income per share to be between $11.10 and $11.40. This reflects the company's strong Q2 performance but also acknowledges ongoing demand uncertainties in several markets.
“Led by strong performance in the Paint Stores Group, we continued to execute on our proven strategy across the Company to deliver consolidated sales within our expectations, gross margin expansion, EBITDA growth, and a 12.5% percent increase in adjusted diluted net income per share,” said President and Chief Executive Officer, Heidi G. Petz.
For more detailed financial information, please refer to the full 8-K filing.
Explore the complete 8-K earnings release (here) from Sherwin-Williams Co for further details.
