Sherwin-Williams (NYSE: SHW) Stock: Analysts Go Wild, S&P 500 Beating Potential!

Sherwin-Williams (NYSE: SHW) is attracting attention from analysts as a reliable and promising investment option. Despite facing economic headwinds, high inflation, and sluggish housing markets, the company’s long-term outlook remains positive. Analysts have noted a shift in sentiment towards Sherwin-Williams, with upgraded price targets and expectations of strong earnings growth.

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Key Points

1. Sherwin-Williams is experiencing a positive shift in analysts’ sentiment, with many rating it as a Moderate Buy and issuing upward price target adjustments. The consensus price target is currently $261.60.
2. The stock offers reliable capital returns, with a low payout ratio suggesting the potential for consecutive annual increases for the next 46 years. Additionally, the company has been actively repurchasing shares.
3. From a technical standpoint, Sherwin-Williams shares have formed a bottom and are positioned to move higher. The market is currently above the 150-day moving average, with indicators pointing towards a possible target of $260. Resistance at $280 may pose a greater challenge.

Sherwin-Williams, a company in the NYSE listed as SHW, is gaining attention from analysts as a reliable stock option. The company has consistently shown strong capital returns and is expected to continue this trend. In fact, its long-term outlook suggests it will outperform the S&P 500.

While Sherwin-Williams shares have faced pressure over the past year due to economic headwinds, high inflation, and sluggish housing markets, there are signs that the outlook is improving. Analysts view the housing market as “better than expected” in the near term, which is expected to drive earnings growth for Sherwin-Williams. This positive sentiment shift indicates that the market is ready for a rebound.

In terms of analysts’ sentiment, Sherwin-Williams has experienced a positive shift since its Q1 earnings release in April. Currently, 19 analysts rate the stock as a Moderate Buy, and 7 have made revisions or initiated coverage since then. It is worth noting that sentiment has improved compared to last year, and the price target for the stock is beginning to stabilize.

The consensus price target for Sherwin-Williams is $261.60, which is around 6% higher than its recent price. While this figure is lower than the previous year, it is expected to trend higher again. Among the 7 new reports, 6 include upward revisions to price targets, with most exceeding the consensus. The price targets range from $265 to $275, and there is potential for further increases before the next earnings report is released.

Two major firms, BMO and Jeffries, have upgraded Sherwin-Williams to Outperform and Buy, respectively. They believe that easing raw material costs and favorable housing market conditions will contribute to the company’s earnings growth and relative strength compared to the S&P 500.

Sherwin-Williams is expected to report its Q2 results at the end of July, and it may face a high bar to beat. However, there have already been 19 upward revisions to revenue and earnings forecasts since the last report, and more are anticipated. The consensus predicts a 2.5% revenue growth and a 9% earnings growth, which is significantly better than what is expected for the broader market. Additionally, data from home builders supports this positive outlook.

Although Sherwin-Williams does not offer a high dividend yield, it does provide a reliable distribution that has consistently grown over the years. With a low payout ratio of 30%, the company has the potential for 46 more years of consecutive annual increases. The next increase is expected in November 2023, ranging from 8% to 10%. Moreover, the company has engaged in share repurchases, having bought back 1.3 million shares in Q1. It still has around $43.9 million remaining under its current authorization, accounting for about 17% of the float.

Institutional investors are attracted to Sherwin-Williams primarily due to its dividend, and they have been buying the stock at its long-term lows. Currently, institutions own approximately 75% of the stock and have been buying it at a ratio of 1.3:1 over the past 12 months. The buying activity has accelerated in the first half of 2023, and it may continue given the positive shift in analysts’ sentiment.

From a technical perspective, Sherwin-Williams’ stock has formed a bottom over the past year and is showing signs of starting an upward trend. The market is currently above the 150-day moving average, and bullish indicators suggest that it could reach $260. If it surpasses this level, the next resistance target is $280, which may present a challenge.

 

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