SHW Q1 Earnings Call: Resilient Margins Amid Soft Revenue and Choppy Demand

Paint and coating manufacturer Sherwin-Williams (NYSE: SHW) fell short of the market’s revenue expectations in Q1 CY2025, with sales falling 1.1% year on year to $5.31 billion. Its non-GAAP profit of $2.25 per share was 4.1% above analysts’ consensus estimates.

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StockStory’s Take

Sherwin-Williams’ Q1 results reflected a challenging demand landscape, with management describing the environment as “choppy” and marked by continued softness in several end markets. CEO Heidi Petz pointed to low single-digit growth in the Paint Stores Group, underpinned by mid-single-digit price increases, with volume offsetting some of those gains. The Protective and Marine segment stood out, delivering high single-digit growth thanks to infrastructure and energy-related projects, while other divisions faced headwinds. Management emphasized tight cost controls, supply chain efficiencies, and strategic SG&A management as key factors supporting margins, even as revenue fell short of expectations.

Looking ahead, management reiterated its full-year guidance, citing confidence in its ability to navigate volatility through ongoing operational improvements and targeted investments. Petz acknowledged persistent uncertainty related to tariffs and broader economic conditions, but reassured that most raw materials are sourced domestically, limiting the direct impact of new trade measures. The company’s strategy centers on expanding its competitive moat, leveraging scale and digital investments, and pursuing above-market growth, particularly in areas like residential repaint and select infrastructure projects.

Key Insights from Management’s Remarks

Sherwin-Williams’ management highlighted several key operational levers and market trends shaping the quarter’s results, while also flagging persistent headwinds. The company’s ability to drive margin expansion despite a softer top line was a central theme, with ongoing investments in growth and efficiency.

• Paint Stores Group price execution: Management credited mid-single-digit price increases for offsetting weak volumes, with disciplined implementation and customer engagement leading to strong price realization. The company expects the positive impact of pricing to diminish in coming quarters as prior increases become fully annualized.
• Protective and Marine momentum: The Protective and Marine division posted high single-digit growth, driven by energy, water, and infrastructure projects. Management reported market share gains and a healthy pipeline of upcoming projects, with new account wins contributing to the performance.
• Cost controls and digital efficiency: Tight SG&A management and ongoing supply chain improvements were cited as drivers of year-over-year margin expansion. Al Mistysyn, CFO, pointed to the benefits from digitization and simplification initiatives, notably in administrative functions where SG&A fell by a mid-teens percentage.
• Consumer and DIY headwinds: The Consumer Brands Group faced pressure from weak do-it-yourself (DIY) demand in North America and unfavorable currency exchange impacts. Management noted ongoing efforts with retail partners to stimulate end demand but characterized the segment as “bumping around a bit.”
• Suvinil acquisition in Brazil: Leadership expressed optimism about the pending acquisition of BASF’s Suvinil business, highlighting its strong market position in Latin America. The deal, expected to close in the second half of the year, is anticipated to complement Sherwin-Williams’ existing regional presence and provide new growth avenues.

Drivers of Future Performance

Management expects the next several quarters to remain volatile, driven by continued macroeconomic uncertainty, evolving raw material costs, and the pace of recovery in key end markets. The company’s strategic focus is on margin resilience, targeted investments, and expanding market share in core segments.

• Tariff and cost pressures: While direct exposure to tariffs is limited, management noted that new trade measures could drive low single-digit increases in raw material costs. The company plans to offset these with selective price adjustments and ongoing productivity initiatives.
• Store expansion and market share: The plan to open 80–100 new stores this year is expected to support growth in the Paint Stores Group, especially in residential repaint and protective segments where market share gains are being realized.
• Integration of Suvinil acquisition: The anticipated closing and integration of Suvinil in Brazil is viewed as a catalyst for accelerating growth in Latin America, with management citing operational synergies and cross-selling opportunities as likely contributors to future profitability.

Top Analyst Questions

• John McNulty (BMO): Asked about Sherwin-Williams’ ability to pass through cost increases from tariffs. Management responded that while most raw materials are sourced domestically, selective price increases may be considered if tariffs persist.
• Vincent Andrews (Morgan Stanley): Queried about margin resilience despite volume declines. CFO Al Mistysyn attributed margin strength to supply chain efficiencies, positive price mix, and ongoing SG&A discipline.
• Ghansham Panjabi (Baird): Sought clarity on the outlook for new residential and incremental share gains. CEO Heidi Petz indicated that while the market remains pressured by high mortgage rates, Sherwin-Williams continues to strengthen partnerships and gain position for long-term growth.
• Kevin McCarthy (Vertical Research Partners): Inquired about the strategic rationale for acquiring Suvinil and its impact on guidance. Management highlighted Suvinil’s strong market leadership and confirmed it is not yet included in guidance, pending deal closure.
• Emily Fusco (Deutsche Bank): Asked if DIY demand is worsening in North America. Management described the segment as remaining under pressure but not deteriorating further, with efforts ongoing to stimulate demand through retail partnerships.

Catalysts in Upcoming Quarters

Looking ahead, the StockStory team will be monitoring (1) the pace of store openings and whether these translate into sustained market share gains, (2) the integration timeline and early impact of the Suvinil acquisition in Brazil, and (3) the company’s ability to maintain or expand margins as raw material and tariff pressures evolve. The effectiveness of operational efficiency initiatives and the trajectory of end-market recovery, particularly in residential and infrastructure segments, will also be important signposts.

Sherwin-Williams currently trades at a forward P/E ratio of 29.1×. At this valuation, is it a buy or sell post earnings? The answer lies in our free research report.

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