Paint and coating manufacturer Sherwin-Williams (NYSE:SHW) met Wall Street’s revenue expectations in Q2 CY2025, but sales were flat year on year at $6.31 billion. On the other hand, next quarter’s revenue guidance of $6.16 billion was less impressive, coming in 2.2% below analysts’ estimates. Its non-GAAP profit of $3.38 per share was 11.2% below analysts’ consensus estimates.
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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: $85.05 billion
StockStory’s Take
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.
Looking ahead, Sherwin-Williams anticipates continued turbulence in demand for the remainder of the year, with management lowering full-year adjusted earnings guidance. CEO Heidi Petz cautioned that macroeconomic indicators, customer sentiment, and consumer confidence all “reflect continued uncertainty and hesitancy to invest.” The company expects no lift from broader market conditions and will rely on aggressive investments in customer-facing growth, ongoing restructuring actions, and expanded cost control to drive above-market growth when demand eventually recovers. While management remains optimistic about future market share gains, they noted that persistent headwinds in key end markets could pressure both volumes and margins in the near term.
Key Insights from Management’s Remarks
Management attributed the quarter’s results to a mix of targeted investments, competitive shifts, and ongoing operational adjustments in response to weak end-market demand.
- Aggressive restructuring efforts: Sherwin-Williams more than doubled its full-year restructuring target to $105 million, expecting $80 million in annual savings. These actions include broader cost reductions and plant consolidations, a response to deteriorating demand in several markets.
- Competitive disruption in architectural coatings: The company observed major rivals reducing customer-facing staff and implementing significant price increases, with management viewing this as validation of Sherwin-Williams’ strategy and a rare opportunity to gain market share, especially in commercial, new residential, and property maintenance segments.
- Paint Stores Group resilience: Sales in this core business increased by a low single-digit percentage, driven by mid-single-digit price gains but offset by low single-digit volume declines. Residential repaint and new residential both outperformed broader market trends, with market share gains attributed to proactive customer engagement and localized intelligence.
- Consumer Brands and Performance Coatings softness: Both segments faced headwinds, with Consumer Brands impacted by ongoing DIY weakness in North America and performance issues in Latin America, while Performance Coatings was challenged by unfavorable price mix and higher costs, offsetting gains in Europe and Asia.
- Continued investment in growth: Despite the soft environment, Sherwin-Williams is accelerating investments in customer-facing resources and new store openings, particularly in the Paint Stores Group, aiming to capitalize on what management called a “once-in-a-career opportunity” to strengthen its competitive moat.
Drivers of Future Performance
Sherwin-Williams’ guidance for the coming quarters rests on muted demand expectations, ongoing cost reductions, and a focus on market share gains amid industry headwinds.
- Sustained weak demand across segments: The company expects softness to persist in new residential, DIY, and coil coatings markets, with macroeconomic factors like interest rates and consumer confidence limiting near-term sales recovery. Management does not anticipate any immediate improvement, with CEO Heidi Petz emphasizing, “We expect no help from the market over the remainder of the year.”
- Cost discipline and restructuring benefits: Expanded restructuring efforts are expected to yield $80 million in annual savings, with a meaningful portion realized in the second half of the year. The company is also reducing capital expenditures by $170 million, prioritizing projects with the highest return, and maintaining a disciplined approach to general and administrative expenses.
- Market share as a core focus: Management sees the current environment as a unique chance to gain share in professional and commercial segments, leveraging the company’s direct distribution model and customer relationships. The expectation is that when end-market demand improves, Sherwin-Williams will be well-positioned to grow at a rate above the overall market, particularly in Paint Stores Group.
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 $342, in line with $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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