Sherwin-Williams shares decline as 2023 guidance reflects ‘very challenging demand environment’

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Sherwin-Williams (NYSE:SHW) reported results for its fourth quarter of 2022 Thursday morning, with earnings per share slightly better than analysts’ estimates and revenue slightly below what was expected. Sherwin-Williams also issued earnings per share guidance for 2023 that was well below what analysts expected, sending shares lower by about 9%. The lower-than-expected guidance reflects a “very challenging demand environment in 2023.”

Sherwin-Williams reported fourth-quarter EPS of $1.89, $0.03 better than the analyst estimates of $1.86. Revenue for the quarter came in at $5.23 billion versus the consensus estimate of $5.26B. The company guided 2023 adjusted EPS of $7.95-$8.65, lower than the analyst estimate of $10.14.

“…we will not be immune from what we expect to be a very challenging demand environment in 2023,” explained Chairman and Chief Executive Officer, John G. Morikis. “Visibility beyond our first half of the year is limited. On the architectural side, U.S. housing will be under significant pressure this year. Slowing existing home sales and continued high inflation also will be headwinds. On the industrial side, we have already seen a slowdown in Europe, and the same is beginning to appear in the U.S. across several sectors. In China, COVID remains a factor and the trajectory of economic recovery is difficult to map.”

Sherwin-Williams also thinks the U.S. housing slowdown too will impact some of its industrial businesses, namely Industrial Wood and Coil.

“Against this backdrop, we expect 2023 first quarter consolidated net sales growth to be flat to up a mid-single-digit percentage compared to the first quarter of 2022. For the full year 2023, relying on indicators we see at this time, we expect consolidated net sales to be down a mid-single-digit percentage to flat compared to 2022. With annual sales at this level, we are introducing diluted net income per share guidance in the range of $6.79 to $7.59 per share, including acquisition-related amortization expense of $0.81 per share and restructuring expense of $0.25 to $0.35 per share. Full year 2023 adjusted diluted net income per share is expected to be in the range of $7.95 to $8.65 per share compared to $8.73 per share in 2022.”