Sherwin-Williams (SHW)

Paint and coating manufacturer Sherwin-Williams (NYSE:SHW) announced better-than-expected revenue in Q3 CY2025, with sales up 3.2% year on year to $6.36 billion. The company expects next quarter’s revenue to be around $5.43 billion, close to analysts’ estimates. Its non-GAAP profit of $3.59 per share was 4.4% above analysts’ consensus estimates.

Company Overview

Widely known for its success in the paint industry, Sherwin-Williams (NYSE:SHW) is a manufacturer of paints, coatings, and related products.

Traditionally, building materials companies have built competitive advantages with economies of scale, brand recognition, and strong relationships with builders and contractors. More recently, advances to address labor availability and job site productivity have spurred innovation. Additionally, companies in the space that can produce more energy-efficient materials have opportunities to take share. However, these companies are at the whim of construction volumes, which tend to be cyclical and can be impacted heavily by economic factors such as interest rates. Additionally, the costs of raw materials can be driven by a myriad of worldwide factors and greatly influence the profitability of building materials companies.

Competitors offering similar products include PPG Industries (NYSE:PPG), RPM International (NYSE:RPM), and Axalta Coating Systems (NYSE:AXTA).

Examining a company’s long-term performance can provide clues about its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last five years, Sherwin-Williams grew its sales at a tepid 5.3% compounded annual growth rate. This fell short of our benchmark for the industrials sector and is a tough starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Sherwin-Williams’s recent performance shows its demand has slowed as its revenue was flat over the last two years.

This quarter, Sherwin-Williams reported modest year-on-year revenue growth of 3.2% but beat Wall Street’s estimates by 2.6%. Company management is currently guiding for a 2.5% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 3.1% over the next 12 months. Although this projection indicates its newer products and services will fuel better top-line performance, it is still below average for the sector.

Sherwin-Williams has best-in-class unit economics for an industrials company, enabling it to invest in areas such as research and development. Its margin also signals it sells differentiated products, not commodities. As you can see below, it averaged an elite 45.8% gross margin over the last five years. Said differently, roughly $45.84 was left to spend on selling, marketing, R&D, and general administrative overhead for every $100 in revenue.

This quarter, Sherwin-Williams’s gross profit margin was 49.2%, in line with the same quarter last year. On a wider time horizon, the company’s full-year margin has remained steady over the past four quarters, suggesting its input costs (such as raw materials and manufacturing expenses) have been stable and it isn’t under pressure to lower prices.

Operating margin is one of the best measures of profitability because it tells us how much money a company takes home after procuring and manufacturing its products, marketing and selling those products, and most importantly, keeping them relevant through research and development.

Sherwin-Williams has been an efficient company over the last five years. It was one of the more profitable businesses in the industrials sector, boasting an average operating margin of 14.9%. This result isn’t surprising as its high gross margin gives it a favorable starting point.

Looking at the trend in its profitability, Sherwin-Williams’s operating margin rose by 2.1 percentage points over the last five years, as its sales growth gave it operating leverage.

In Q3, Sherwin-Williams generated an operating margin profit margin of 18.4%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Sherwin-Williams’s EPS grew at an unimpressive 7.4% compounded annual growth rate over the last five years. On the bright side, this performance was better than its 5.3% annualized revenue growth and tells us the company became more profitable on a per-share basis as it expanded.

Diving into the nuances of Sherwin-Williams’s earnings can give us a better understanding of its performance. As we mentioned earlier, Sherwin-Williams’s operating margin was flat this quarter but expanded by 2.1 percentage points over the last five years. On top of that, its share count shrank by 9.9%. These are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Sherwin-Williams, its two-year annual EPS growth of 4.2% was lower than its five-year trend. We hope its growth can accelerate in the future.

In Q3, Sherwin-Williams reported adjusted EPS of $3.59, up from $3.37 in the same quarter last year. This print beat analysts’ estimates by 4.4%. Over the next 12 months, Wall Street expects Sherwin-Williams’s full-year EPS of $11.31 to grow 8.1%.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Sherwin-Williams has shown mediocre cash profitability over the last five years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 5.9%, subpar for an industrials business. The divergence from its good operating margin stems from its capital-intensive business model, which requires Sherwin-Williams to make large cash investments in working capital and capital expenditures.

Taking a step back, we can see that Sherwin-Williams’s margin dropped by 5.1 percentage points during that time. This along with its unexciting margin put the company in a tough spot, and shareholders are likely hoping it can reverse course. If the trend continues, it could signal it’s becoming a more capital-intensive business.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Although Sherwin-Williams hasn’t been the highest-quality company lately, it found a few growth initiatives in the past that worked out wonderfully. Its five-year average ROIC was 19%, splendid for an industrials business.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Uneventfully, Sherwin-Williams’s ROIC has stayed the same over the last few years. Given the company’s underwhelming financial performance in other areas, we’d like to see its returns improve before recommending the stock.

Sherwin-Williams reported $241.5 million of cash and $13.58 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $4.49 billion of EBITDA over the last 12 months, we view Sherwin-Williams’s 3.0× net-debt-to-EBITDA ratio as safe. We also see its $193 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We enjoyed seeing Sherwin-Williams beat analysts’ revenue expectations this quarter. We were also happy its EBITDA outperformed Wall Street’s estimates. Overall, this print had some key positives. The stock traded up 5.3% to $354.03 immediately after reporting.

Updated: December 4, 2025 at 10:47 PM EST

Before investing in or passing on Sherwin-Williams, we urge you to understand the company’s business quality (or lack thereof), valuation, and the latest quarterly results - in that order.

Sherwin-Williams isn’t a terrible business, but it isn’t one of our picks. First off, its revenue growth was uninspiring over the last five years, and analysts don’t see anything changing over the next 12 months. And while its admirable gross margins indicate the mission-critical nature of its offerings, the downside is its flat organic revenue disappointed. On top of that, its cash profitability fell over the last five years.

Sherwin-Williams’s P/E ratio based on the next 12 months is 27.7x. Investors with a higher risk tolerance might like the company, but we think the potential downside is too great. We're pretty confident there are more exciting stocks to buy at the moment.

Wall Street analysts have a consensus one-year price target of $385.81 on the company (compared to the current share price of $335.37).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.