Why Sherwin-Williams Company (SHW) Closed Lower Today

NEW YORK (TheStreet) -- Sherwin-Williams Company (SHW) pulled lower Friday after announcing that its agreement to acquire the Mexico unit of Consorcio Comex had been terminated.

By market close, shares had fallen 3.3% to $193.89.

The paint and coatings producer said as per its agreement dated Sep. 16, 2013 either party could terminate the agreement without penalty if the closing of the acquisition did not occur before March 31, 2014.

A day earlier, the company filed a complaint for a declaratory judgment from the Supreme Court of the State of New York, requesting the court to declare Sherwin-Williams had used commercially reasonable efforts to close the acquisition.

On April 1, Consorcio Comex faulted Sherwin-Williams for breaching its obligations to use such commercially reasonable efforts.

Further details will be provided once the company reports its first quarter before the bell on Thursday, April 17.

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TheStreet Ratings team rates SHERWIN-WILLIAMS CO as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:

"We rate SHERWIN-WILLIAMS CO (SHW) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income, revenue growth, notable return on equity and expanding profit margins. We feel these strengths outweigh the fact that the company shows weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • SHERWIN-WILLIAMS CO reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, SHERWIN-WILLIAMS CO increased its bottom line by earning $7.26 versus $6.01 in the prior year. This year, the market expects an improvement in earnings ($8.38 versus $7.26).
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Chemicals industry average. The net income increased by 70.6% when compared to the same quarter one year prior, rising from $68.05 million to $116.12 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 14.1%. Since the same quarter one year prior, revenues rose by 10.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Chemicals industry and the overall market, SHERWIN-WILLIAMS CO's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • 47.73% is the gross profit margin for SHERWIN-WILLIAMS CO which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 4.72% trails the industry average.
  • You can view the full analysis from the report here: SHW Ratings Report
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