Sherwin-Williams Q2 Earnings Call Highlights
Key Points
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- Strong Q2 performance: Sherwin-Williams delivered high-single-digit sales growth, with adjusted EPS up about 10%, EBITDA up 10.5% to $1.5 billion, and margin expanding to 21.5%. Growth was driven by share gains, new accounts and the Suvinil acquisition rather than broad market recovery.
- Raised full-year outlook: Based on first-half results, the company now expects consolidated sales growth in the mid- to high-single-digit range and adjusted diluted EPS of $11.80 to $12.20. Protective Marine, Consumer Brands and Performance Coatings all exceeded expectations.
- Pricing and capital allocation: Sherwin-Williams announced an 8% Paint Stores Group price increase effective Sept. 1 to offset rising raw-material costs, while returning $1.5 billion to shareholders through dividends and buybacks. Management also maintained a disciplined approach to acquisitions after withdrawing from the AkzoNobel bid.
Sherwin-Williams (NYSE:SHW) reported high-single-digit consolidated sales growth in the second quarter of 2026, supported by new account wins, share gains and contributions from the Suvinil acquisition, while management said broad demand conditions remained largely unchanged.
Adjusted diluted earnings per share increased about 10% from the prior-year period, while adjusted EBITDA rose 10.5% to $1.5 billion. Adjusted EBITDA margin expanded 60 basis points to 21.5% of sales. The company also reported a 21% increase in net operating cash, or $235 million, and free-cash-flow conversion of 86%.
Based on its first-half performance, Sherwin-Williams raised its full-year outlook. The company now expects consolidated sales to rise by a mid- to high-single-digit percentage and adjusted diluted EPS to range from $11.80 to $12.20.
Segment Growth Led by Share Gains and Acquisition Contribution
Chair, President and Chief Executive Officer Heidi Petz said sales growth reflected customer engagement, account wins and share gains rather than a recovery in underlying markets. “Growth will need to come from what we do, not from what the market gives us,” Petz said.
Paint Stores Group sales increased by a mid-single-digit percentage, including low-single-digit volume growth and price-mix growth at the low end of the mid-single-digit range. The company said all professional customer segments grew.
- Protective Marine: Sales increased by a mid-teens percentage, marking the eighth consecutive quarter of at least high-single-digit growth. Management cited data centers, semiconductor infrastructure, manufacturing onshoring, water treatment and pharmaceuticals as sources of demand.
- Commercial: Sales rose by a high-single-digit percentage despite what management characterized as a soft underlying market, following customer-targeting efforts over the past 24 months.
- Residential repaint and property maintenance: Both businesses posted mid-single-digit increases, according to Petz.
- New residential: Sales grew by a low-single-digit percentage on account wins, although management said single-family starts and completions have been negative in five of the past six months.
Paint Stores Group segment profit grew by a mid-single-digit percentage and segment margin was 24.6%. The company opened 45 stores year to date and closed 57 stores, or about 1% of its Paint Stores Group locations. Petz said the closed locations did not meet the company’s profitability threshold and that the actions were intended to improve the productivity of the store network.
Sherwin-Williams still expects to open 80 to 100 stores during 2026, though the net store increase will be about 30. Beginning next year, management expects to return to the high end of 80 to 100 net new stores annually.
Consumer Brands and Performance Coatings Exceed Expectations
Consumer Brands Group sales exceeded company expectations, aided by a mid-teens contribution from the Suvinil acquisition. Excluding Suvinil, segment sales rose by a mid-single-digit percentage. Legacy Latin America sales, excluding Suvinil, increased by a low-double-digit percentage.
North American sales rose by a high-single-digit percentage, including low-single-digit volume growth, driven by new products, favorable mix and professional painters. Management said DIY demand remained muted. European sales declined by a double-digit percentage against a high-teens prior-year comparison, reflecting customer inventory management and destocking.
Consumer Brands adjusted segment margin increased 210 basis points to 24.5%. Chief Financial Officer Ben Meisenzahl said about half of the improvement came from stronger core operating performance, with mid-single-digit sales growth and flat selling, general and administrative expense excluding Suvinil. The other half reflected favorable non-operating items. He said adjusted segment margin would have been roughly flat sequentially without those items.
Performance Coatings Group sales also exceeded expectations, with growth across every division and region. Both volume and price mix rose by low-single-digit percentages, while foreign exchange provided a low-single-digit tailwind.
General industrial sales rose by a high-single-digit percentage, including mid-single-digit volume growth, led by general finishing and heavy equipment construction. Automotive Refinish sales increased by a high-single-digit percentage, while Packaging, Coil and Wood each grew by mid-single digits. Asia-Pacific sales rose by a strong double-digit percentage and North American sales increased by a mid-single-digit percentage. Adjusted segment margin expanded 50 basis points, with incremental margin of 26.4%.
Pricing Actions Address Higher Raw-Material Costs
Management said raw-material inflation is expected to increase to a high-single-digit rate in the second half, bringing the full-year outlook to a mid-single-digit increase. The company cited higher oil-related costs and continued volatility but said it does not expect raw-material availability to become an issue.
Sherwin-Williams announced an 8% Paint Stores Group price increase effective Sept. 1. Petz said the company delayed the increase to avoid disrupting customers during the peak paint-selling season. Meisenzahl said realization is expected to follow the company’s typical historical pattern, with some benefit extending into 2027 because of customer contracts and timing.
The company expects full-year consolidated price mix to increase by a mid-single-digit percentage and expects to maintain full-year gross margin at the prior-year level at the midpoint of its guidance. Performance Coatings pricing actions are being implemented more selectively by business unit and region, management said.
Capital Allocation and M Discipline
Sherwin-Williams returned $1.5 billion to shareholders through dividends and share repurchases during the quarter, taking advantage of market volatility to accelerate repurchases. The company ended the quarter with net debt to adjusted EBITDA of 2.4 times.
Petz also addressed the company’s decision to withdraw from a joint bid with Nippon Paint Holdings for AkzoNobel assets. She said the company viewed the assets as complementary but concluded that there were more attractive uses of shareholder cash after it did not receive the level of engagement it sought following two bids.
“We’re not desperate for those assets,” Petz said, adding that Sherwin-Williams has substantial organic growth opportunities and would continue to evaluate assets that fit its strategy at the right value.
Management said Suvinil remains a positive addition, with additional synergies and customer-growth opportunities identified during integration. Meisenzahl said integration activities are expected to continue through the remainder of 2026 and into early 2027, with Suvinil expected to be an immaterial EPS tailwind for the year.
About Sherwin-Williams (NYSE:SHW)
Sherwin-Williams (NYSE: SHW) is a global manufacturer and distributor of paints, coatings and related products. Founded in 1866 and headquartered in Cleveland, Ohio, the company supplies a broad range of coatings for residential, commercial and industrial applications. Its product offering includes architectural paints and stains, industrial and protective coatings, automotive finishes, and a variety of sundry products such as primers, sealants and specialty treatments used by professionals and consumers.
The company sells through multiple channels, including a large network of company-operated retail paint stores that serve professional contractors and do-it-yourself consumers, as well as through distributors and mass retailers.
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