📢 Earnings Summary — SHW

Sherwin-Williams delivered a solid Q3 with sales at the high end of guidance, margin expansion, and EPS growth despite a demand backdrop that remains soft. Paint Stores Group continued to outperform with broad-based growth, while Consumer Brands saw mixed trends and Performance Coatings faced margin pressure from mix. Management narrowed full-year EPS guidance without changing the midpoint and now sees 2025 sales up low single digits, aided by the Suvinil acquisition. The company is pushing through a 7% price increase in Paint Stores Group on January 1, maintaining growth investments in stores and reps, and sustaining tight cost control, including a temporary pause of the 401(k) match. Looking to 2026, management expects choppy, muted demand with cost inflation and higher interest expense, but intends to offset these with pricing, efficiencies, and continued share gains. Capital returns remained robust, and the new HQ/R&D move is underway, with CapEx normalizing next year.

📈 Growth Highlights

• Consolidated sales grew at the high end of guidance YoY; gross margin and gross profit dollars expanded
• Adjusted EBITDA margin expanded 60 bps to 21.4%; adjusted diluted EPS up 6.5% YoY
• Paint Stores Group (PSG) sales up mid-single digits; volume up low single digits; price/mix up at the high end of low single digits
• Protective & Marine up low double digits (5th consecutive quarter of high single-digit or better growth)
• Residential Repaint up mid-single digits; Commercial up mid-single digits; New Residential up low single digits; Property Maintenance and DIY up low single digits
• Exterior and interior sales both up mid-single digits
• Performance Coatings Group (PCG): Packaging up double digits (incl. acquisition); Auto Refinish up mid-single digits (NA up high single digits) driven by share gains
• Opened 23 net new stores in Q3 and 61 YTD; tracking toward 80–100 new North America stores in 2025

🔨 Business Development

• Closed the Suvinil acquisition (added to Consumer Brands Group Latin America); expected to add a low single-digit percentage to Q4 consolidated sales with an immaterial negative EPS impact at close
• Channel optimization in Latin America: closed 8 net Sherwin-Williams stores; shifted volume to selected qualified dealers
• Added sales reps commensurate with new store openings
• Began moving into new Cleveland headquarters and R&D center; completion expected in spring

💵 Financial Performance

• SG&A growth moderated to low single digits YoY; on track for a full-year low single-digit SG&A increase including targeted growth investments
• Administrative SG&A down low double digits YoY excluding corporate restructuring and new building costs
• PSG segment profit up mid-single digits; segment margin up 40 bps; >30% incremental margin on low single-digit volume growth; segment gross margin flattish
• Consumer Brands Group adjusted segment margin increased; reduced by 85 bps due to severance and restructuring; supply chain inefficiencies from lower production volumes
• PCG segment profit and margin declined on unfavorable product/region mix and higher costs to support sales; -30 bps from restructuring
• Updated FY25 sales guidance: up low single digits vs 2024
• Narrowed FY25 adjusted diluted EPS guidance to $11.25–$11.45 (midpoint unchanged at $11.35)
• Returned $864 million to shareholders via share repurchases and dividends in the quarter

🏦 Capital & Funding

• Expect higher interest expense due to new headquarters financing and earlier refinancing at higher rates
• CapEx expected to return to ~2% of sales next year post headquarters/R&D completion; modest cost headwind from buildings
• Restructuring savings estimated at ~$40 million in 2025 and ~$80 million on a full-year run-rate basis thereafter
• Continued capital returns via share repurchases and dividends ($864 million in Q3)

🧠 Operations & Strategy

• Continuing aggressive growth investments: 80–100 new stores in 2025 and additional sales reps; focus on new account wins and share-of-wallet gains
• Announced a 7% price increase in Paint Stores Group effective January 1; targeted increases in other segments; effectiveness expected within historical range but tempered by market dynamics and mix
• Tight production and inventory management aligned with demand
• Ongoing efficiency and simplification initiatives; disciplined pricing to counter cost headwinds
• Temporarily paused company 401(k) match effective October 1 to preserve jobs and prioritize customer-facing investments; intent to reinstate when feasible
• Administrative cost discipline maintained; excluding restructuring and new building costs, administrative SG&A declined low double digits YoY

🌍 Market Outlook

• Demand environment remains ‘softer for longer’; choppiness expected through at least 1H 2026; leading indicators show minimal positive catalysts
• Q4 guidance reflects seasonality and includes Suvinil, with an immaterial negative EPS impact from deal-related costs
• 2026 initial cost view: raw materials up low single digits (incl. tariffs); healthcare up low double digits; wages up low single digits
• Mortgage rate commentary: existing-home turnover likely improves as 30-year rates approach ~6%, with notable pent-up demand
• Expect higher interest expense next year; continue to pursue pricing, efficiencies, and share gains to offset cost inflation

⚠ Risks & Headwinds

• Persistent soft demand across end markets; continued North America DIY weakness
• Unfavorable FX impacts in Latin America
• Cost inflation: raw materials (incl. tariffs), healthcare, and wages
• Higher interest expense from financing and refinancing; modest cost headwind from new facilities
• Supply chain inefficiencies from lower production volumes
• Unfavorable product and regional mix pressuring PCG margins
• Price increase realization may be tempered by market dynamics and segment mix

AI-generated earnings recap sourced from company results & conference call observations. Not investment advice — verify with official filings.