Despite Housing Market Jitters, Paint Giant Is Set To Deliver: Analyst

Despite the current housing market downturn and an unpredictable future, paint and coatings giant Sherwin-Williams Co SHW is positioned to outperform, according to Jefferies.

The Analyst: Laurence Alexander upgraded the stock from a Hold to a Buy rating, and raised the price target to $275.00 from $240.00, according to Benzinga's analyst page.

Alexander's bullish sentiment comes as data issued Wednesday from Black Knight Inc BKI shows a 13% spike in the national delinquency rate in April, largely due to an uptick in early-stage delinquencies, indicating potential stress in the housing sector.

The analyst pegs Sherwin-Williams as a “bellwether proxy” for investor sentiment on the housing cycle. The stock has underperformed so far this year compared to industry peers.

However, the company is set up for earnings growth in the coming years, Alexander says.

“Large caps like Sherwin-Williams typically outperform smaller names in the cycle,” the analyst said, alluding to a broad economic slowdown.

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Black Knight’s data paints the same murky picture of the broader housing market. High mortgage rates crept back over 7% on Wednesday. Also, low inventory appears to be affecting the spring home buying season.

Within the seemingly gloomy forecast, resilient players like Sherwin-Williams could offer investors a potential buffer against headwinds, according to Alexander.

In an environment of economic contraction, the coatings manufacturer has consistently outperformed expectations, the analyst noted. As investor anxieties rise over a potential recession, Sherwin-Williams’ capacity for sustained growth amid market challenges could prove to be a safe haven for investors.

SHW Price Action: Shares of Sherwin-Williams are trading 0.13% lower to $226.66, according to data from Benzinga Pro.

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