- Morgan Stanley analyst Vincent Andrews reiterated an Overweight rating on the shares of Sherwin-Williams Co SHW and lowered the price target from $300 to $275.
- While 2023 guidance wasn’t what anyone expected, numbers have now been reset with recessionary assumptions that may or may not play out to the fullest extent.
- For better or for worse, these numbers are now in the stock as well, presenting the typical trough of cycle Chemicals sector investment decision.
- For now, the analyst takes the ‘Over’ on guidance as the company has purposefully embedded bear case assumptions throughout the P&L.
- Sherwin’s shares will likely be range bound until there is further clarity on 2H, but this has been the analyst’s expectation for both Sherwin and the overall coatings sector for some time now.
- Also Read: Sherwin-Williams Reports Mixed Q4 Earnings; Warns On Challenging Demand Environment In 2023
- The analyst said that a breakout would likely be a function of better-than-expected macro data, which is plausible.
- Sherwin purposefully reset earnings expectations for 2023 with guidance well below both consensus and buy side expectations, though the analyst believes that market expectations were likely assuming a different macro case for both Performance Coatings and Consumer Brands.
- Raw material deflation benefits are held back in the beginning of the year by carry over of high cost inventory and a weaker volume environment, but the benefits are indeed coming, the analyst added.
- The macro data has been a huge headwind for Sherwin’s shares for more than a year now, however, the second derivative may now be moving in the company’s favor.
- Last but not least, the pace of Fed rate increases has already decelerated and MS economists believe that the next hike will be the last and that cuts will come in 4Q, added the analyst.
- Price Action: SHW shares are trading higher by 2.17% at $229.95 on the last check Friday.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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