Sherwin-Williams Scales New 52-Week High: What's Driving it?

Shares of paint giant, Sherwin-Williams SHW, touched a fresh 52-week high of $362.57 yesterday, before retracing to close the day at $361.03.

Sherwin-Williams, a Zacks Rank #1 (Strong Buy) stock, has a market capitalization of roughly $33.6 billion. The average volume of shares traded by the company in the past three months is 568K. The stock has an expected long-term earnings growth rate of 11.4%.

Sherwin-Williams' shares have rallied around 34.3% year to date, outperforming the Zacks categorized Paints & Allied Products industry's roughly 26% gain in the said timeframe. Sherwin-Williams is seeing strong momentum in its Paint Stores Group unit and is also benefiting from its cost control initiatives. It also remains focused on growth through acquisitions and expansion of operations.

Driving factors

Sherwin-Williams' shares are heading higher on upbeat prospects stemming from its $11.3 billion acquisition of Valspar. The company, earlier this month, wrapped up its purchase of Valspar, creating a premier global paints and coatings company.

The Valspar acquisition allows Sherwin-Williams to reinforce its position as a leading paints and coatings provider globally leveraging highly complementary offerings, strong brands and technologies. Valspar is a strategic fit and the merger extends Sherwin-Williams' brand portfolio and customer relationships in North America and bolster its global finishes business. The buyout also significantly enhances Sherwin-Williams' competitive profile.

The combined entity with pro-forma annual revenues of $15.8 billion has a prominent market position in architectural paint across North America, South America, China, Australia and the UK. It is also a global leader in packaging coatings, coil coatings, general industrial coatings and industrial wood coatings.

Sherwin-Williams expects to achieve $320 million in annual synergies within three years of the closure of the deal. It also expects the transaction to be immediately accretive to adjusted earnings and to considerably increase its operating cash flow.

Sherwin-Williams expects mid-to-high single digit percentage year over year increase in net sales for second-quarter 2017. The company also expects earnings for the quarter in the range of $4.15–$4.35 per share, including a 25 cents charge from costs associated with the Valspar acquisition. The company will report its second-quarter results on July 20.

Sherwin-Williams Company (The) Price and Consensus

 

Sherwin-Williams Company (The) Price and Consensus | Sherwin-Williams Company (The) Quote

Other Stocks to Consider

Other well-placed companies in the basic materials space include The Chemours Company CC, Stepan Company SCL and Kronos Worldwide, Inc. KRO, all sporting a Zacks Rank #1. You can see the complete list of today's Zacks #1 Rank stocks here.

Chemours has an expected long-term earnings growth of 15.5%.

Stepan has an expected earnings growth of 8.2% for the current year.

Kronos has an expected earnings growth of 354.8% for the current year.

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