The Sherwin-Williams Company Reports 2024 Third Quarter Financial Results
CLEVELAND, Oct. 22, 2024 /PRNewswire/ -- The Sherwin-Williams Company (NYSE:SHW) announced its financial results for the third quarter ended September 30, 2024. All comparisons are to the third quarter of the prior year, unless otherwise noted.
SUMMARY
Consolidated net sales increased 0.7% in the quarter to $6.16 billion
Net sales from stores in the Paint Stores Group open more than twelve calendar months increased 2.2% in the quarter
Diluted net income per share increased 7.8% to $3.18 per share in the quarter compared to $2.95 per share in the third quarter 2023
Adjusted diluted net income per share increased 5.3% to $3.37 per share in the quarter compared to $3.20 per share in the third quarter 2023
Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) in the quarter increased 1.2% to $1.28 billion, or 20.8% of net sales
Reaffirming full year 2024 diluted net income per share guidance in the range of $10.30 to $10.60 per share, including acquisition-related amortization expense of $0.80 per share
Reaffirming full year 2024 adjusted diluted net income per share guidance in the range of $11.10 to $11.40 per share
CEO REMARKS
"Sherwin-Williams grew sales, expanded gross margin, and increased EBITDA and adjusted diluted net income per share despite continued choppiness in the demand environment," said President and Chief Executive Officer, Heidi G. Petz. "Strong cash generation in the quarter enabled us to return $631 million to our shareholders through dividends and share repurchases. We also chose to invest ahead of the curve in the quarter, given the unprecedented long-term opportunities that continue to emerge from an increasingly uncertain competitive landscape. We are highly confident these current near-term investments in stores, sales and technical reps, expanded services and digital capabilities will help generate sustained and profitable above-market growth. We expect SG&A to moderate sequentially, resulting in a low to mid-single digit increase for the second half as anticipated.
"In Paint Stores Group, growth was led by a high-single digit increase in protective & marine. Our prior investments in residential repaint continued to drive mid-single digit growth in a down market. New residential grew at a similar rate as anticipated. The Group also announced a 5% price increase effective January 6, 2025. Sales in our Consumer Brands Group declined driven by continued softness in the North American DIY market. In Performance Coatings Group, our Packaging business grew by a high-single digit percentage and continued to regain share. We also delivered growth in our Coil and Industrial Wood businesses."
THIRD QUARTER CONSOLIDATED RESULTS
Three Months Ended September 30,
2024
2023
$ Change
% Change
Net sales
$ 6,162.5
$ 6,116.7
$ 45.8
0.7 %
Income before income taxes
$ 1,022.8
$ 1,009.0
$ 13.8
1.4 %
As a % of net sales
16.6 %
16.5 %
Net income per share - diluted
$ 3.18
$ 2.95
$ 0.23
7.8 %
Adjusted net income per share - diluted
$ 3.37
$ 3.20
$ 0.17
5.3 %
Consolidated Net sales increased primarily due to higher sales in the Paint Stores Group and the impact from the acquisition in 2023. These increases were partially offset by lower sales in the Consumer Brands and Performance Coatings Groups as well as approximately 1.0% unfavorable foreign currency translation.
Income before income taxes increased primarily due to higher Net sales and lower provisions for environmental matters recorded in the Administrative function, partially offset by continued investments in the Paint Stores Group and digital technologies.
Diluted net income per share included a charge of $0.19 per share for acquisition-related amortization expense in both the third quarter of 2024 and 2023. In the third quarter of 2023, diluted net income per share also included a charge of $0.06 per share related to activities associated with the Company's restructuring plan.
THIRD QUARTER SEGMENT RESULTS
Paint Stores Group (PSG)
Three Months Ended September 30,
2024
2023
$ Change
% Change
Net sales
$ 3,650.2
$ 3,537.1
$ 113.1
3.2 %
Same-store sales change (1)
2.2 %
3.0 %
Segment profit
$ 895.9
$ 917.5
$ (21.6)
(2.4) %
Reported segment margin
24.5 %
25.9 %
(1) Same-store sales represents Net sales from stores open more than twelve calendar months.
Net sales in PSG increased primarily due to low-single digit sales volume growth and continued realization of higher selling prices implemented earlier in the year. Net sales increased in most professional customer end markets, led by protective and marine, residential repaint and new residential. PSG Segment profit decreased primarily due to increased costs to support higher sales and continued investments in long-term growth strategies, including higher employee-related costs, partially offset by higher Net sales.
Consumer Brands Group (CBG)
Three Months Ended September 30,
2024
2023
$ Change
% Change
Net sales
$ 790.5
$ 854.8
$ (64.3)
(7.5) %
Segment profit
$ 165.5
$ 101.6
$ 63.9
62.9 %
Reported segment margin
20.9 %
11.9 %
Adjusted segment profit (1)
$ 181.4
$ 117.6
$ 63.8
54.3 %
Adjusted segment margin
22.9 %
13.8 %
(1) Adjusted segment profit equals Segment profit excluding the impact of Valspar acquisition-related amortization expense. In CBG, Valspar acquisition-related amortization expense was $15.9 million and $16.0 million in the third quarter of 2024 and 2023, respectively.
Net sales in CBG decreased primarily as a result of soft DIY demand in North America and an approximate 4% impact from unfavorable foreign currency translation driven by Latin America. CBG Segment profit increased primarily due to higher fixed cost absorption in the manufacturing and distribution operations within the segment and effective cost control, partially offset by lower Net sales. Acquisition-related amortization expense reduced Segment profit as a percent of Net sales by 200 basis points in the third quarter of 2024 compared to 190 basis points in the third quarter of 2023.
Performance Coatings Group (PCG)
Three Months Ended September 30,
2024
2023
$ Change
% Change
Net sales
$ 1,720.0
$ 1,724.2
$ (4.2)
(0.2) %
Segment profit
$ 259.7
$ 279.7
$ (20.0)
(7.2) %
Reported segment margin
15.1 %
16.2 %
Adjusted segment profit (1)
$ 308.9
$ 329.4
$ (20.5)
(6.2) %
Adjusted segment margin
18.0 %
19.1 %
(1) Adjusted segment profit equals Segment profit excluding the impact of Valspar acquisition-related amortization expense. In PCG, Valspar acquisition-related amortization expense was $49.2 million and $49.7 million in the third quarter of 2024 and 2023, respectively.
Net sales in PCG were effectively flat as a result of sales volume growth, inclusive of the acquisition in 2023, being fully offset by unfavorable foreign currency translation. Performance was led by Packaging, which increased in all regions, Coil and Industrial Wood. PCG Segment profit decreased primarily as a result of lower sales in North America and unfavorable foreign currency related impacts. Acquisition-related amortization expense reduced Segment profit as a percent of Net sales by 290 basis points in the third quarter of 2024 and 2023.
LIQUIDITY AND CASH FLOW
The Company generated $2.22 billion in Net operating cash and returned cash of $1.97 billion to our shareholders in the form of dividends and repurchases of 4.4 million shares of its common stock during the first nine months of 2024. At September 30, 2024, the Company had remaining authorization to purchase 35.3 million shares of its common stock through open market purchases.
2024 GUIDANCE
Fourth Quarter
Full Year
2024
2024
Net sales
Flat to up low-single digit %
Flat to up low-single digit %
Effective tax rate
Low twenty percent
Diluted net income per share
$10.30
-
$10.60
Adjusted diluted net income per share (1)
$11.10
-
$11.40
(1) Excludes $0.80 per share of acquisition-related amortization expense.
"In what remains a tough macroeconomic environment, our strategy continues to be providing our customers with differentiated solutions that make them more productive and profitable," said Ms. Petz. "We are confident the growth and efficiency investments we have made will enable us to continue outperforming the market. Our team is focused, determined and experienced, and we will continue to aggressively pursue above market growth while controlling what we can control.
"In our pro architectural business, demand remains variable by end market, with no impact to date from recent interest rate cuts. North American DIY demand remains weak driven by inflation and higher consumer debt levels. In our industrial businesses, demand remains choppy by end market and region. Against this backdrop, we expect fourth quarter 2024 consolidated net sales to be flat to up a low-single digit percentage compared to the fourth quarter of 2023.
"We are maintaining our previous full year earnings guidance, recognizing the current range is wider than typical entering a fourth quarter. This range accounts for several variables that are hard to forecast precisely, including demand related to recovery from hurricanes Helene and Milton, and the potential for extended holiday shutdowns by industrial customers. Specifically, we expect full year 2024 sales to be flat to up a low-single digit percentage compared to full year 2023. We continue to guide to full year 2024 diluted net income per share of $10.30 to $10.60 per share, including acquisition-related amortization expense of $0.80 per share, compared to $9.25 per share in 2023. Our adjusted diluted net income per share guidance remains $11.10 to $11.40 per share, an increase of 8.7% at the mid-point compared to 2023."
CONFERENCE CALL INFORMATION
The Company will host a conference call to discuss its financial results for the third quarter, and its outlook for the fourth quarter and full year 2024, at 10:00 a.m. EDT on Tuesday, October 22, 2024. Heidi G. Petz, Sherwin-Williams President and Chief Executive Officer, along with other senior executives, will participate on the call.
The conference call will be webcast simultaneously in listen only mode. To listen to the webcast on the Sherwin-Williams website, click on https://investors.sherwin-williams.com/financials/quarterly-results/, then click on the webcast icon following the reference to the Q3 webcast. An archived replay of the webcast will be available at https://investors.sherwin-williams.com/financials/quarterly-results/ beginning approximately two hours after the call ends.
ABOUT THE SHERWIN-WILLIAMS COMPANY
Founded in 1866, The Sherwin-Williams Company is a global leader in the manufacture, development, distribution, and sale of paint, coatings and related products to professional, industrial, commercial, and retail customers. The Company manufactures products under well-known brands such as Sherwin-Williams®, Valspar®, HGTV HOME® by Sherwin-Williams, Dutch Boy®, Krylon®, Minwax®, Thompson's® WaterSeal®, Cabot® and many more. With global headquarters in Cleveland, Ohio, Sherwin-Williams® branded products are sold exclusively through a chain of more than 5,000 Company-operated stores and branches, while the Company's other brands are sold through leading mass merchandisers, home centers, independent paint dealers, hardware stores, automotive retailers, and industrial distributors. The Sherwin-Williams Performance Coatings Group supplies a broad range of highly-engineered solutions for the construction, industrial, packaging and transportation markets in more than 120 countries around the world. Sherwin-Williams shares are traded on the New York Stock Exchange (symbol: SHW). For more information, visit www.sherwin.com.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This press release contains "forward-looking statements," as defined under U.S. federal securities laws, with respect to sales, earnings and other matters. Forward-looking statements can be identified by the use of forward-looking words such as "believe," "expect," "estimate," "project," "plan," "goal," "target," "potential," "intend," "aspire," "strive," "may," "will," "should," "could," "would," "seek" or "anticipate" or the negative thereof or comparable words. Any statements that refer to expectations, projections or other characterizations of future events or conditions, are forward-looking statements. Forward-looking statements are based upon management's current expectations, predictions, estimates, assumptions and beliefs concerning future events and conditions. Readers are cautioned not to place undue reliance on any forward-looking statements. Forward-looking statements are subject to risks, uncertainties and other factors, many of which are outside the control of the Company and actual results may differ materially from such statements and from the Company's historical performance, results and experience. These risks, uncertainties and other factors include such things as: general business conditions, including the strength of retail and manufacturing economies and growth in the coatings industry; adverse changes in general economic conditions, including the inflationary environment, global credit markets, and currency fluctuations; any disruption in the availability of, or increases in the price of, raw material and energy supplies; disruptions in the supply chain; catastrophic events, adverse weather conditions and natural disasters; losses of or changes in our relationships with customers and suppliers; our ability to successfully integrate past and future acquisitions; risks and uncertainties associated with our expansion into and our operations in foreign markets; cybersecurity incidents and other disruptions to our information technology systems; our ability to attract, retain, develop and progress a qualified global workforce; our ability to execute on our business strategies related to sustainability matters, and achieve related expectations; damage to our business, reputation, image or brands due to negative publicity; our ability to protect or enforce our material trademarks and other intellectual property rights; our ability to comply with numerous and evolving laws, rules and regulations; adverse changes to our tax positions; increasingly stringent domestic and foreign governmental regulations; inherent uncertainties involved in assessing our potential liability for environmental-related activities; other changes in governmental policies, laws and regulations; the nature, cost, quantity and outcome of pending and future litigation and other claims; and other risks, uncertainties and factors described from time to time in the Company's reports filed with the Securities and Exchange Commission. Since it is not possible to predict or identify all of the risks, uncertainties and other factors that may affect future results, the above list should not be considered a complete list. Any forward-looking statement speaks only as of the date on which such statement is made, and the Company undertakes no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
INVESTOR RELATIONS CONTACTS:
Jim Jaye Senior Vice President, Investor Relations & Corporate Communications Direct:
Eric SwansonVice President, Investor RelationsDirect:
MEDIA CONTACT:
Julie YoungVice President, Global Corporate CommunicationsDirect:
The Sherwin-Williams Company and Subsidiaries
Statements of Consolidated Income (Unaudited)
(in millions, except per share data)
Three Months Ended September 30,
Nine Months Ended September 30,
2024
2023
2024
2023
Net sales
$ 6,162.5
$ 6,116.7
$ 17,801.3
$ 17,799.7
Cost of goods sold
3,135.0
3,200.5
9,179.4
