Sherwin-Williams faced a challenging second quarter, as a flat demand environment and higher costs weighed on results, leading to a negative market reaction. Management cited persistent softness in new residential, do-it-yourself (DIY), and coil coatings segments, while highlighting that gross margins expanded for the twelfth consecutive quarter due to effective pricing and mix in the Paint Stores Group. CEO Heidi Petz acknowledged, “this was not a perfect quarter,” attributing earnings declines to increased non-operating costs, project timing on new facilities, and continued investments in growth initiatives. Despite these pressures, the company emphasized market share gains in core segments like residential repaint and new residential construction, which outperformed broader market trends.
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Sherwin-Williams (SHW) Q2 CY2025 Highlights:
- Revenue: $6.31 billion vs analyst estimates of $6.29 billion (flat year on year, in line)
- Adjusted EPS: $3.38 vs analyst expectations of $3.81 (11.2% miss)
- Adjusted EBITDA: $1.32 billion vs analyst estimates of $1.45 billion (20.9% margin, 8.8% miss)
- Revenue Guidance for Q3 CY2025 is $6.16 billion at the midpoint, below analyst estimates of $6.30 billion
- Management lowered its full-year Adjusted EPS guidance to $11.35 at the midpoint, a 4.2% decrease
- Operating Margin: 17.4%, down from 20% in the same quarter last year
- Locations: 5,135 at quarter end, up from 5,044 in the same quarter last year
- Organic Revenue was flat year on year, in line with the same quarter last year
- Market Capitalization: $83.58 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions Sherwin-Williams’s Q2 Earnings Call
- David Begleiter (Deutsche Bank) asked about the risk of further demand deterioration and which segments might be most affected. CEO Heidi Petz pointed to new residential, coil coatings, and DIY as areas of concern, citing ongoing volatility and a need to closely monitor customer sentiment.
- Vincent Andrews (Morgan Stanley) pressed for details on which Paint Stores Group subsegments offer the most share gain opportunities. Petz cited commercial, new residential, and property maintenance, noting project timing can affect the pace of market share gains.
- John McNulty (BMO Capital Markets) inquired about SG&A spending and whether store openings or headcount additions would continue. CFO Al Mistysyn explained that store and rep additions are targeted to high-return markets, with SG&A growth expected to moderate in the second half.
- Jeff Zekauskas (JPMorgan) questioned the factors behind the current competitive inflection point and the reasons for price declines in Consumer Brands. Petz attributed it to Sherwin-Williams’ longstanding stability and evolving market channels, while Jim Jaye clarified that price mix and regional shifts contributed to Consumer Brands results.
- Greg Melich (Evercore) asked how volume declines impacted gross margins. Mistysyn responded that gross margin gains were driven by Paint Stores Group pricing, but lower production volumes and supply chain adjustments created headwinds.
Catalysts in Upcoming Quarters
In the quarters ahead, our analysts will focus on (1) the pace and effectiveness of restructuring savings, (2) whether investments in Paint Stores Group translate into sustained market share gains as demand recovers, and (3) ongoing cost control in the face of persistent end-market weakness. Additional attention will be paid to the company’s ability to manage inventory and supply chain efficiency as production volumes remain under pressure.
Sherwin-Williams currently trades at $336.25, down from $342.01 just before the earnings. Is there an opportunity in the stock?The answer lies in our full research report (it’s free).
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