Sherwin-Williams Stock Is Falling. Blame Its Earnings, and Inflation.

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Earnings and revenue for the second quarter missed Wall Street expectations. Daniel Acker/Bloomberg

Sherwin-Williams stock fell by double digits in premarket trading after the paint manufacturer reported a weaker-than-expected financial performance and cut its forecast of its earnings for the year.

Sherwin-Williams (ticker: SHW) posted adjusted earnings for its second quarter, ended June 30, of $2.41 per share, while the consensus call among analysts tracked by FactSet was for $2.77 a share. Net sales of $5.87 billion were less than the $6.03 billion consensus call on Wall Street.

Chief Executive John Morikis said in the companys earnings release that Sherwin-Williams is cutting its forecast for full-year adjusted earnings between $8.50 and $8.80 a share from $9.25 to $9.65, given the shortfall in our second quarter results, demand pressures in Europe, China and North American DIY, and a continuation of the highest cost inflation seen in decades.

Demand has deteriorated faster than anticipated in Europe and no meaningful recovery occurred in China following the lifting of Covid lockdowns, hurting sales of the Consumer Brands Group and Performance Coatings Group, management said.

Shares of Sherwin-Williams were down 11.5% to $225 before the open. Coming into Wednesday trading, the stock had fallen 28% in 2022.

Morikis said that as it seeks to respond to inflation, the company is raising prices for its Americas Group by 10%, effective Sept. 6, with significant additional pricing actions being taken in our other two operating segments.

This price increase comes at a time when American shoppers are trading down, or changing buying behaviors to save money while inflation remains high.

We will manage our expenses tightly in the second half with the slowdown in market demand in certain regions and businesses, however, we will continue to invest in growth, including stores, sales representatives and innovative products, Morikis said.

Write to Angela Palumbo at [email protected]

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