Sherwin-Williams (SHW) PT Lowered to $286 at BofA Securities, 'risk to valuation'

BofA Securities analyst Steve Byrne lowered the price target on Sherwin-Williams (NYSE: SHW) to $286.00 (from $289.00) while maintaining a Underperform rating.

The analyst comments "SHW posted 1Q adj EPS of $2.17 (above our $2.09 but below consensus’ $2.22), with revenue 1.5% below the year-ago quarter, but with EBITDA slightly improved, largely from lower raws and improved supply chain (all similar to PPG). Sherwin’s flattish revenue growth the last 3 quarters reflects housing-related weakness in US architectural coatings demand, unlike the robust sales growth in the prior 6 quarters (see Exh 2). While Sherwin and PPG are both coatings pure-plays, the end market difference is significant, particularly US housing exposure, as ~70% of Sherwin’s sales are architectural (mostly US), vs a third for PPG (mostly ex-US). Sherwin’s industrial end market businesses performed similarly to PPG’s (see Exh 1). Sherwin’s US housing exposure, the source of our caution on the shares, could remain challenged in 2024 due to low existing home sales and a slumping LIRA index (see Exhibit 3-4). There remains a 300bp spread between homeowner mortgage rates and the current market mortgage rate. We note SHW trades near a Linde multiple and 10x P/E turns higher than PPG."

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