Shareholders may have noticed that The Sherwin-Williams Company (NYSE: SHW) filed its annual result around the same time last week. The initial response was not positive, with stocks falling 5.5% to US $ 692 last week. This is an overall credible result, with revenues of US $ 18 billion and statutory earnings per share of US $ 22.08, both in line with analyst estimates, showing Sherwin-Williams is performing as expected. . Profits are an important time for investors because they can follow a company’s performance, look at what analysts are forecasting for next year, and see if there has been a change in sentiment towards the company. Readers will be happy to know that we have aggregated the latest statutory forecast to see if analysts have changed their minds on Sherwin-Williams after the latest results. NYSE: SHW Profit and Revenue Growth February 1, 2021
After the latest results, the 21 analysts covering Sherwin-Williams are now forecasting revenues of US $ 19.4 billion in 2021. If achieved, that would reflect an acceptable 5.7% improvement in sales over the last 12 month. Statutory earnings per share are expected to increase 10% to US $ 24.71. Before this report was written, analysts had modeled revenues of US $ 19.1 billion and earnings per share (EPS) of US $ 24.22 in 2021. Analysts appear to have become more bullish on the company, judging by their new profits by sharing estimates.
The consensus price target remained unchanged at US $ 774, implying that improving earnings prospects should not have a long-term impact on creating shareholder value. There is another way to think about price targets, however, and that is to look at the range of price targets offered by analysts, as a wide range of estimates might suggest a different view of the possible outcomes for the market. business. The most bullish analyst at Sherwin-Williams has a price target of US $ 875 per share, while the most pessimistic puts it at US $ 400. Notice the wide gap in analysts’ price targets? This implies for us that there is a fairly wide range of possible scenarios for the underlying activity.
Looking at the big picture now, one of the ways we can understand these forecasts is to compare them to past performance and industry growth estimates. We would like to point out that Sherwin-Williams’ revenue growth is expected to slow, with an expected increase of 5.7% next year well below the historic growth of 11% per year over the past five years. Compare that to 167 other companies in this industry with analyst coverage, which are expected to grow their revenues by 5.5% per year. Given the expected slowdown in growth, it looks like Sherwin-Williams is expected to grow at about the same rate as the industry as a whole.
The bottom line
The biggest takeaway for us is the consensus upgrade in earnings per share, which suggests a clear improvement in sentiment around Sherwin-Williams’ earnings potential next year. They also reconfirmed their revenue estimates, with the company expected to grow at roughly the same rate as the industry as a whole. The consensus price target remained at US $ 774, with the latest estimates not being sufficient to impact their price targets.
Continuing on from this reflection, we believe that the company’s long-term outlook is much more relevant than next year’s results. We have a forecast for Sherwin-Williams through 2025, and you can view them for free on our platform here.
That said, we still have to consider the ever-present specter of investment risk. We have identified 1 warning sign with Sherwin-Williams and understanding this should be part of your investment process.
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