Sherwin-Williams is cut to sell to Credit Suisse
The sentiment of the analyst Sherwin-Williams (NYSE: SHW) it has been falling in recent months and now the downward trend is gaining momentum. Credit Suisse analysts downgraded shares to sell them citing a number of factors that equate to one thing: this highly valued stock has outpaced its pandemic-inspired business peak and winds are forming against the pandemic. economy. In particular, home sales have been slow, which, when combined with COVID’s tailwinds that no longer exist, is leading to a sharp decline in DIY demand. In the eyes of Credit Suisse analyst John Roberts, the shares are due to a “valuation correction” that could reduce 10% or more of recent price action.
MarketBeat.com – MarketBeat
“Our lower performance rating at Sherwin-Williams is based on the fact that the company has more economic sensitivity than is generally recognized, due to the defensive performance of profits during the pandemic,” he explained. “While SHW’s balance between pro-applied and DIY residential paint has provided a defensive attitude during the pandemic, this may not be repeated during a non-pandemic period of rising interest rates.”
The 20 analysts who value the shares have linked them to a firm Hold, but this is lower than a firm buy in the last 12 months. Marketbeat.com’s $ 320 consensus price target is still more than 20% above price action, but this has also had a lower trend. Credit Suisse’s $ 245 target is the new low.
Analysts have set a very high bar for Sherwin-Williams
We see only a downside risk in the outlook for Sherwin-Williams’ second-quarter earnings expectations. Analysts forecast revenue of $ 6.02 billion, which is good for a company record and a 20.4% sequential and 11.8% year-over-year gain. While we see the potential for growth both sequentially and year-over-year, we do not believe that current trends support the analyst’s outlook. Our view is that the company will have a stable income compared to last year with the possibility of shrinking profits. In this case, investors should be prepared for the fund to fall from the price action.
Sherwin-Williams pays a safe dividend, but investors shouldn’t expect the market to hold up. The dividend is safe because it is very small at only 0.85% of the share price. The result is that holders can rely on payment during the expected fall due to the low 30% payout ratio and the rock solid balance. Holders may also expect another dividend increase at the end of the year.
Institutions are still pending Sherwin-Williams
Institutions are not only clinging to Sherwin-Williams shares, they are also buying them. Institutional activity has been clearly upward for the last 10 consecutive quarters and purchases increased in the first two quarters of 2022. Total institutional holdings are up to 77.35% and are growing and should contribute to support the long-term price action. However, if sentiment begins to change in this quadrant, it will push down the price action.
As for the chart, Sherwin-Williams shares bottomed out earlier this year and started to rise after the last earnings report. The caveat is that price action is still below a key resistance point at $ 280 and may not be able to exceed that level before the next earnings report. If the report is as dull as we think it will be, the price action will not move above $ 280 after the report. 