Key Points
- Q2 2024 net sales: $6.27 billion, up 0.5% year over year.
- EBITDA Margin: Improved to 22.9% from 20.5% in Q2 2023.
- Full-year net income guidance was raised to $10.30-$10.60 per share.
Paint and coatings manufacturer Sherwin-Williams (SHW -0.64%)released second-quarter earnings on Tuesday that noted minimal quarterly revenue growth year over year, but improved full-year guidance. The 0.5% bump in revenue met the lower end of management's guidance of "flat to up low single-digit percent."
Earnings before interest, taxes, depreciation, and amortization (EBITDA) rose 12.1% year over year to $1.44 billion, EBITDA margin improved to 22.9%. Net income per share was up 14% year over year to $3.50.
Overall, the quarter showed solid profitability enhancements driven by effective cost management and pricing strategies.
| Metric | Q2 2024 | Q2 2023 | Change (YOY) |
|---|---|---|---|
| Revenue | $6.27 billion | $6.24 billion | 0.5% |
| EBITDA | $1.44 billion | $1.29 billion | 12.1% |
| Diluted net income per share | $3.50 | $3.07 | 14% |
| Adjusted diluted net income per share | $3.70 | $3.29 | 12.5% |
Source: Sherwin-Williams. YOY = Year over year. EBITDA = Earnings before interest, taxes, depreciation, and amortization.
Sherwin-Williams overview
Sherwin-Williams operates through three segments: Paint Stores Group, Consumer Brands Group, and Performance Coatings Group. It primarily serves architectural, industrial, and commercial markets. Recently, Sherwin-Williams turned its focus to sourcing efficiencies, cost management, and product innovation to drive growth. Key success factors include maintaining competitive pricing and leveraging its strong brand portfolio.
In its operations, Sherwin-Williams emphasizes technological advancements and sourcing efficiencies. By investing in employee development and fostering a culture of innovation, the company supports long-term strategic goals.
Q2 2024 performance highlights
While Sherwin-Williams' net sales improved only minimally, its Paint Stores Group's net sales increased 3.5% year over year to $3.62 billion, driven by growth in residential repaint and new residential markets. The segment's profits rose 6.8% to $907.1 million.
In contrast, the Consumer Brands segment saw a 10.7% decrease in net sales to $844 million. The drop was attributed to lower DIY paint demand and the divestiture of its China architectural business. The divestiture did help segment profit surged 85.3% year over year to $204.4 million. That profit growth also benefitted from better cost absorption and moderating raw material costs.
The Performance Coatings Group posted a modest 0.6% rise in net sales to $1.81 billion, with segment profit increasing by 10.6% to $301.5 million. Notable growth came from North American Industrial Wood, Coil, and Automotive Refinish sectors, though General Industrial sectors showed softness globally.
Marginal improvements in raw material costs positively impacted the company's EBITDA and gross margins. CEO Heidi G. Petz emphasized continued investments in digital technologies and long-term strategies to sustain competitive differentiation. Employee-related costs rose slightly due to talent development spending.
Looking ahead
Looking forward, management expects a cautious yet optimistic outlook for Q3. Net sales in Q3 are projected to grow by a low-single-digit percentage.
Sherwin-Williams management updated its guidance for the full year, raising its net sales forecast to a low single-digit percentage gain and its diluted net income per share to a range of $11.10 to $11.40 per share compared to $10.35 per share in 2023. That suggests an increase of 8.7% at the mid-point.
The updated full-year guidance reflects cautious optimism amid macroeconomic uncertainties.
Investors should monitor potential market trends, cost management, and strategic initiatives focused on innovation and growth. Key areas to watch include future developments in raw material costs, digital technology investments, and talent acquisition and retention strategies.