The Sherwin-Williams Company (SHW) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call indicates mixed signals: slight growth in key segments and disciplined cost management, but challenges in DIY demand and uncertain 2026 outlook. The Q&A highlights confidence in margin guidance and strategic market share focus but also notes competitive pressures and weather impacts. The lack of clarity on the mega merger's impact adds uncertainty. Overall, the balanced positives and negatives suggest a neutral sentiment, with no strong catalysts for significant short-term stock price movement.
Key Financial Performance
Consolidated sales (Q4 2025) Increased by a mid-single-digit percentage, inclusive of a low single-digit contribution from Suvinil.
Gross margin (Q4 2025) Flattish year-over-year, but expanded excluding the dilutive impact of the Suvinil acquisition.
SG&A as a percent of sales (Q4 2025) Decreased year-over-year, reflecting disciplined ongoing cost control measures.
Adjusted diluted net income per share (Q4 2025) Increased by 6.7%.
Adjusted EBITDA (Q4 2025) Grew 13.4% and expanded 120 basis points to 17.7% as a percent of sales.
Free cash flow conversion (Q4 2025) 90.1%.
Paint Stores Group sales (Q4 2025) Increased in the expected range, led by high single-digit growth in Protective & Marine. Residential repaint growth was slightly below mid-single-digit range. Segment margin expanded 90 basis points to 20.8%.
Consumer Brands Group sales (Q4 2025) Exceeded expectations. Sales from Suvinil and positive low single-digit FX were partially offset by price/mix and volume, both down less than 1 percentage point. Adjusted segment margin increased excluding Suvinil impacts.
Performance Coatings Group sales (Q4 2025) At the high end of expectations, led by strength in packaging and Auto Refinish. Adjusted segment margin improved 150 basis points to 19%.
Administrative SG&A (Q4 2025) Down a low single-digit percentage, including onetime restructuring costs of approximately $2 million. Excluding these costs, administrative SG&A was down by a low teens percentage.
Net operating cash (Full Year 2025) Grew 9.4% to $3.5 billion or 14.6% of sales.
Free cash flow (Full Year 2025) $2.7 billion with a free cash flow conversion of 59%.
Capital returned to shareholders (Full Year 2025) $2.5 billion through share repurchases and dividends.
Net debt to adjusted EBITDA ratio (End of 2025) 2.3x.
Paint Stores Group sales (Full Year 2025) Grew by a low single-digit percentage. Protective & Marine increased by high single digits. Residential repaint increased by mid-single digits. Segment margin increased.
Consumer Brands Group sales (Full Year 2025) Grew by a low single-digit percentage, driven by Suvinil acquisition. Underlying sales decreased by low single digits due to soft DIY demand in North America and unfavorable FX. Adjusted segment margin decreased.
Performance Coatings Group sales (Full Year 2025) Flat overall, outpacing a challenging industrial demand backdrop. Adjusted segment margin remained in high teens target range but was impacted by unfavorable geographic mix.
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Operating Highlights
Suvinil acquisition: Contributed to consolidated sales growth in Q4 and full year 2025. It added a low single-digit percentage to sales and impacted gross margin.
Innovative solutions: Continued focus on delivering innovative solutions for customers, contributing to record full-year consolidated sales and earnings.
Residential repaint: Identified as the single biggest growth opportunity for 2026, with investments continuing in this area.
New account wins: Strong new account wins in Auto Refinish, Industrial Wood, and General Industrial divisions, expected to drive growth in 2026.
Cost control measures: Disciplined cost control led to SG&A as a percent of sales decreasing year-over-year. Administrative SG&A was down significantly.
Capital allocation: Returned $2.5 billion to shareholders through share repurchases and dividends. Strategic CapEx investments included a new global headquarters and technology center.
Strategic investments: Focused on share gains, targeted investments, and enterprise priorities to navigate a challenging demand environment.
401(k) matching program: Reinstated and retroactively restored the 401(k) matching program for U.S. employees, reflecting improved performance and commitment to workforce retention.
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Risk or Challenges
Demand Environment: The demand environment remains soft and is expected to persist well into 2026, with no broad-based or accelerated recovery anticipated. This includes challenges in residential repaint, new residential markets, and DIY segments.
Economic and Market Conditions: High mortgage rates, affordability challenges, and muted consumer sentiment are negatively impacting housing and home improvement markets. Additionally, the U.S. manufacturing PMI and global PMIs in regions like Brazil, Eurozone, and China are contracting, indicating weak industrial demand.
Raw Material Costs: Raw material costs are expected to increase by a low single-digit percentage in 2026, driven by tariffs and select commodity inflation, posing a challenge to gross margin expansion.
Interest Expense: Interest expenses are projected to rise due to lease payments for the new global headquarters, a delayed draw term loan, and refinancing at higher rates, which could impact financial performance.
Geographic and Segment-Specific Challenges: Unfavorable geographic mix, such as growth in Europe while other regions decline, and segment-specific issues like steel tariffs affecting coil sales and soft demand in Industrial Wood and General Industrial divisions, are creating headwinds.
Regulatory and Tariff Impacts: Steel tariffs and new non-BPA coating requirements are adding complexity and cost pressures to operations, particularly in the coil and packaging segments.
Supply Chain and Production Challenges: Lower production in manufacturing operations to match softer demand is resulting in lower fixed cost absorption, particularly in the Consumer Brands segment.
Competitive Pressures: The company faces a disruptive competitive environment, requiring continuous innovation and cost control to maintain market share and profitability.
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Guidance & Outlook
2026 Consolidated Sales: Expected to increase by a low to mid-single-digit percentage.
2026 Diluted Net Income Per Share: Projected to range between $10.70 and $11.10 per share. Adjusted diluted net income per share is expected to range between $11.50 and $11.90, reflecting a 2.4% increase at the midpoint compared to 2025.
Raw Material Costs: Anticipated to rise by a low single-digit percentage in 2026, driven by tariffs and select commodity inflation.
Gross Margin: Expected to expand in 2026 due to incremental pricing and supply chain simplification efforts.
SG&A Expenses: Forecasted to grow by a low single-digit percentage, including contributions from the Suvinil acquisition.
Interest Expense: Projected to increase due to lease payments for the new global headquarters, a delayed draw term loan, and refinancing at higher rates.
Debt-to-EBITDA Leverage Ratio: Expected to remain within the long-term target range of 2 to 2.5x by the end of 2026.
New Store Openings: Plan to open 80 to 100 net new stores in the U.S. and Canada in 2026.
Dividend Increase: Proposed annual dividend increase of 1.3% to $3.20 per share, marking the 48th consecutive year of dividend growth.
Residential Repaint: Identified as the single biggest growth opportunity, with continued investments planned to capture market share.
New Residential Market: Expected to decline by at least mid-single digits in 2026 due to negative single-family starts and softening market conditions.
Commercial Segment: Anticipated to face challenges, with flattish sales expected. Multifamily starts are a bright spot but will not impact completions until late 2026 or 2027.
Protective & Marine: Projected to be one of the best-performing segments in 2026, supported by a solid project pipeline.
Performance Coatings Group: Expected to achieve low single-digit sales growth driven by new account wins and positive price/mix, despite a flat core business backdrop.
Auto Refinish: Forecasted to experience modest growth due to share gains and price/mix improvements, despite industry softness.
Coil Segment: Sales expected to remain flattish due to ongoing pressure from steel tariffs.
Packaging Segment: Projected to achieve flattish sales, supported by share gains and non-BPA coatings, against a tough double-digit comparison.
Industrial Wood and General Industrial Divisions: Expected to achieve low single-digit growth driven by new account wins, despite weak core demand.
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Shareholder Return Plan
Dividend Increase: Sherwin-Williams plans to recommend an annual dividend increase of 1.3% to $3.20 per share, marking the 48th consecutive year of dividend increases.
Share Repurchases: The company returned $2.5 billion to shareholders in 2025 through share repurchases and dividends, and plans to continue opportunistic share repurchases in 2026.
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Key Q&A
Q:What drove the margin outperformance in the Performance Coatings segment in Q4?
A:The margin outperformance was driven by discipline, aggressive focus on new business wins, market share gains, simplification efforts, and strong SG&A controls. The second half of the year showed improvement in operating margins, with a 19% pop in Q4.
Q:What is the SG&A outlook for 2026?
A:SG&A is expected to grow at a low single-digit rate, factoring in the reinstatement of the 401(k) match and incremental costs from Suvinil. Savings of $46 million are anticipated in 2026 due to restructuring efforts.
Q:What underpins the confidence in the implied gross margin guidance for 2026?
A:The confidence is based on a low single-digit increase in raw material costs, cost controls in SG&A, and efforts to mitigate healthcare cost increases. The company is focused on maintaining cost discipline despite a challenging volume environment.
Q:Why wouldn't the price/mix in Q1 2026 be higher despite a 7% price hike in January?
A:The company is prioritizing volume over price to maintain market share in a competitive environment. While price increases are being implemented, the focus is on balancing volume and price to achieve gross margin targets.
Q:What is the impact of severe winter weather on current demand trends and Q1 EPS?
A:The company does not anticipate significant concerns from winter weather, as it is a recurring factor every year and has been managed effectively in the past.
Q:Has the Packaging Coatings segment recovered to new highs since the correction?
A:The segment has recovered much of the temporary share loss and is well-positioned with leading technology. The European Food Safety Association's ban on BPA is expected to drive further customer conversions.
Q:What is the strategy for focusing on volumes rather than price in 2026?
A:The strategy is to balance volume and price in a competitive environment, focusing on gaining market share and converting larger customers while maintaining pricing discipline.
Q:What are the current trends in residential repaint sales?
A:Residential repaint sales were up low single digits, with confidence in continued market share gains. The company is investing in this segment and outperforming the market.
Q:What is the outlook for the Consumer Brands Group in 2026?
A:The group is expected to grow in the low to mid-teens in Q1 and high single to low double digits for the full year, with FX headwinds in the second half. Suvinil's integration is progressing well, and the company is optimistic about its potential in Brazil.
Q:What is the company's view on the Paint Stores Group market in 2026?
A:The market is expected to be down, but the company is confident in its ability to outperform through investments in new stores, dedicated reps, and innovation. The focus is on gaining market share in residential repaint.
Q:What is driving growth in the Protective & Marine segment?
A:Growth is driven by the protective side, particularly in AI infrastructure and data centers. The company is well-positioned with solutions for every surface that needs coating.
Q:What is the company's approach to potential asset sales or acquisitions?
A:The company focuses on organic growth but remains open to disciplined inorganic opportunities that align with its portfolio strategy.
Q:What is the outlook for the DIY market in 2026?
A:The DIY market remains choppy, with volume challenges. The company is focusing on premium products and strategic retail partnerships to drive growth.
Q:What is the expected net price tailwind for 2026?
A:The company expects low single-digit positive price/mix for all segments, with pricing discipline and targeted increases.
Q:Review of Unclear Management Responses
A:Management avoided directly addressing the potential impact of the recent mega merger on the company's strategy, providing only general comments about focusing on organic growth and disciplined portfolio review. Additionally, they did not provide specific details on the expected recovery timeline for the DIY market or the exact impact of severe winter weather on Q1 EPS.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Auto Refinish
Communications Sherwin
Full result
GA slide
Refinish segment
Review Full
SGA percent
Sales acquisition
Sales line
Segment margin
Sherwin Williams
access Newswire
acquisition SGA
beat segment
cash flow
comp Group
comp repaint
contribution margin
control SGA
control effort
control measure
conversion term
core inclusive
decrease volume
digit GA
digit comp
digit cost
digit decrease
effort segment
end expectation
expectation Sales
expectation strength
flow conversion
highlight outlook
impact Coatings
item segment
line beat
margin acquisition
margin impact
margin transaction
measure income
percent sale
restructuring
SHW Transcript
The Sherwin-Williams Company (SHW) Q4 2025 Earnings Call Transcript
Unknown1-29
The earnings call indicates mixed signals: slight growth in key segments and disciplined cost management, but challenges in DIY demand and uncertain 2026 outlook. The Q&A highlights confidence in margin guidance and strategic market share focus but also notes competitive pressures and weather impacts. The lack of clarity on the mega merger's impact adds uncertainty. Overall, the balanced positives and negatives suggest a neutral sentiment, with no strong catalysts for significant short-term stock price movement.
The Sherwin-Williams Company (SHW) Q3 2025 Earnings Call Transcript
Unknown10-28
The earnings call highlights several negative factors: reduced earnings guidance, sales expectations, and capital expenditures, alongside supply chain inefficiencies and softer sales volumes. The Q&A reveals pessimism about market recovery and limited organic growth in key segments. Despite potential synergies from the Suvinil acquisition, the overall sentiment is negative due to reduced guidance, restructuring costs, and a lack of clear recovery catalysts.
The Sherwin-Williams Company (SHW) Q2 2025 Earnings Conference Call Transcript
Unknown7-22
The earnings call summary presents a mixed picture: solid financial performance, strategic growth investments, and shareholder return initiatives are positive. However, the reaffirmation of guidance, choppy market demand, and volume weakness into 2026 are concerns. The Q&A section highlights management's confidence in market share gains and cost control but also notes challenges like margin decline and supply chain inefficiencies. Overall, the sentiment is neutral as positive factors are balanced by uncertainties and potential risks.
The Sherwin-Williams Company (NYSE:SHW) Q1 2025 Earnings Call Transcript
Unknown4-30
The earnings call presented mixed signals. Financial performance shows slight improvements, with EPS and some margin expansions. However, sales performance in key segments is weak, and there are concerns about market demand and supply chain challenges. The dividend increase is positive, but guidance remains cautious, with expectations of a choppy market. The Q&A highlighted management's uncertainty about tariffs and raw material costs, which could weigh on investor sentiment. Overall, the balance of positive and negative factors suggests a neutral stock price movement.
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