SHW

Sherwin-Williams Co

Industrial/Transportation, Event Driven/Special Sit


Presented:03/28/2016
Price:$283.93
Cap:$26.46B
Current Price:$388.55
Cap:$98.01B

Presented

Date03/28/2016
Price$283.93
Market Cap$26.46B
Ent Value$25.95B
P/E Ratio25.42x
Book Value$9.41
Div Yield1.18%
Shares O/S93.19M
Ave Daily Vol965,651
Short Int1.58%

Current

Price$388.55
Market Cap$98.01B
The Sherwin-Williams Co. engages in the development, manufacture, distribution, and sale of paint, coatings, and related products. It operates through the following segments: Paint Stores Group, Consumer Group, Global Finishes Group, Latin America Coatings Group, and Administrative. The Paint Stores Group segment operates specialty paint stores that sell paint, coatings, and related products to end-use customers. The Consumer Group segment develops, produces, and distributes coatings and paint products to third-party customers in the United States and Canada. The Global Finishes Group segment offers protective, marine, and automotive finishes and refinishes products. The Latin America Coatings Group segment comprises of architectural paint and coatings; protective and marine products; and original equipment manufacturer product finishes and related products. The Administrative segment includes administrative, interest, closed facilities, and environmental-related matters expenses. The company was founded by Henry Sherwin and Edward Williams in 1866 and is headquartered in Cleveland, OH.

Publicly traded companies mentioned herein: Home Depot Inc (HD), Lowe’s Companies Inc (LOW), Masco Corp (MAS), PPG Industries Inc (PPG), Sherwin-Williams Co (SHW), The Valspar Corp (VAL)

Highlights

The presenter was long shares of Sherwin-Williams (SHW) prior to the March 20 announcement of the ~$11.3 billion (including debt and equity) deal to acquire Valspar, and said, “With the Valspar acquisition, Sherwin becomes a modified leveraged buyback”. He thinks the deal is somewhat misunderstood on the Street, and intends to continue to hold his long position (perhaps for as long as 2 - 4 years). If the pro forma company is able to delever rapidly (i.e., down to 2x by 2019), and if his estimates prove to be accurate, 2018 cash EPS could reach ~$21. Deal synergies and US housing tailwinds should drive upside for earnings over the next 2+ years, and today the stock is trading at just over a 13x forward multiple, “which is a unique buying opportunity”.

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Idea Discussion

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