Sherwin-Williams Co. (NYSE:SHW) stock traded lower Tuesday after the company reported mixed third-quarter results and narrowed its 2026 adjusted earnings guidance, with the midpoint falling below analyst expectations.
Adjusted earnings per share came in at $3.63, missing the consensus estimate of $3.69.
Sales rose 7.9% year over year to $6.86 billion, exceeding expectations of $6.78 billion.
Margin Pressure Weighs on Results
During the earnings call, CEO Heidi G. Petz said third-quarter gross margin faced pressure from higher raw material and supply chain costs and an unfavorable product mix.
The pressure also reflected dilution from the Suvinil acquisition and stronger growth in lower-margin segments. Excluding Suvinil, gross margin was flat year over year for the first nine months of 2026.
Sales at Paint Stores Group locations open for more than 12 months increased 3.9%, while adjusted EBITDA rose 3.3% year over year to $1.4 billion.
Petz said Sherwin-Williams delivered sales growth across all three reportable segments despite subdued market demand, supported by customer gains, increased share of wallet and productivity improvements.
Segment Performance
Paint Stores Group (PSG): Sales rose 4.7%, driven by higher prices and low-single-digit volume growth.
All professional customer markets reported growth, led by double-digit gains in protective and marine, high-single-digit growth in commercial and mid-single-digit growth in residential repaint.
Segment profit increased 2.1%, primarily reflecting higher sales.
Consumer Brands Group (CBG): Sales jumped 21.7% year over year, benefiting from the Suvinil acquisition, favorable currency translation and an improved product mix.
Adjusted segment profit fell 4.4%, reflecting higher material and supply chain costs, additional selling, general and administrative expenses related to Suvinil, and unfavorable currency transaction effects.
Amortization related to the Valspar acquisition reduced segment profit margin by 170 basis points.
Performance Coatings Group (PCG): Sales increased 8.8%, supported by mid-single-digit price increases and low-single-digit volume growth.
General Industrial, Packaging and Coil each recorded double-digit growth, while Industrial Wood and Automotive Refinish posted low-single-digit gains.
Adjusted segment profit rose 4.7%, driven by higher sales.
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Shareholder Returns and Cash Flow
Sherwin-Williams returned $749 million to shareholders through dividends and share repurchases during the third quarter.
As of Sept. 30, 2026, the company had authorization to repurchase an additional 22.5 million shares in the open market.
The company generated $2.59 billion in operating cash flow during the first nine months of 2026.
Sherwin-Williams Narrows 2026 Earnings Outlook
Sherwin-Williams narrowed its 2026 adjusted EPS guidance to $11.85 to $12.15 from its previous range of $11.80 to $12.20. The midpoint of $12 is below the analyst consensus estimate of $12.08.
The company expects demand to remain “softer for longer,” citing continued volatility across most end markets and few positive leading indicators.
Sherwin-Williams expects raw material inflation to reach the low- to mid-single-digit range in 2027, with the largest year-over-year impact occurring in the first half before moderating in the second half.
To offset inflationary pressures, the company plans targeted price increases, balancing the timing and magnitude of adjustments with customer needs.
On the consumer front, Petz flagged continued weakness in the do-it-yourself (DIY) paint market, saying the company sees no natural catalyst for a near-term recovery.
CFO Ben Meisenzahl echoed those concerns, noting that consumer paint volumes remained under pressure in the third quarter and warning that the weakness could persist into 2027.
Cost-Cutting Initiatives Target $75 Million in 2027 Savings
Sherwin-Williams expects its cost-reduction initiatives to generate approximately $25 million in savings in 2026 and $75 million in 2027.
The 2027 target includes $25 million in savings from restructuring actions implemented in the second and third quarters of 2026, along with additional measures under review for the fourth quarter.
SHW Price Action: Sherwin-Williams shares were down 1.71% at $329.43 at the time of publication on Tuesday, according to Benzinga Pro data.
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