Sherwin-Williams: Strong Q2 Thanks To Newly-Acquired Valspar

Dividend history is one of the most straightforward and accurate measures of business quality.

Intuitively, this makes sense – a company must have a significant and durable competitive advantage in order to raise its dividend every year for decades.

Sherwin-Williams (SHW) is one of the most high-quality, well-managed businesses in our stock universe.

The company has increased its annual dividend since 1979, which qualifies it to be a member of the Dividend Aristocrats – elite dividend stocks with 25+ years of consecutive dividend increases.

The company shows no sign of slowing down. On July 20, Sherwin-Williams reported financial performance for the second quarter ending June 30, 2017. Alongside double-digit revenue growth, Sherwin-Williams gave an update on the integration of its most recent acquisition – Valspar, a fellow manufacturer and distributor of paint and coating products.

This article will discuss Sherwin-Williams’ recent quarterly earnings release and the company’s  general investment prospects in detail.

Business Overview & Current Events

Sherwin-Williams is North America’s largest manufacturer of paints, varnishes, and industrial coatings. The company also manufacturers paint application equipment and other accessory items.

Sherwin-Williams delivers its products through more than 4,000 retail locations via its 60,000+ employees. Founded in 1866, Sherwin-Williams is headquartered in Cleveland, Ohio and has a market capitalization of approximately $33 billion.

As mentioned, Sherwin-Williams recently reported financial performance for the second quarter of fiscal 2017. Sherwin-Williams’ second quarter ends on June 30, in-line with the end of the calendar’s second quarter.

Results were generally quite strong during this reporting period.

The company’s consolidated net sales increased to $3.74 billion, a 16.0% from the same period a year ago. For the six month period ending June 30, Sherwin-Williams’ revenues increased 12.1% from 2016’s figure.

Naturally, the most important aspect of this Sherwin-Williams earnings release was the impact of the recently-acquired Valspar business.

Valspar was an international manufacturer of paints and coatings headquartered in Minneapolis, Minnesota. Valspar had annual revenues of ~$4 billion and about 11,000 employees on payroll at the time of the acquisition.

Sherwin-Williams’ acquisition of Valspar had a significant impact on the firm’s financial performance. The transaction created an 11.8% and 6.6% boost to quarterly and six-month sales, respectively.

The transaction also generated plenty of one-time financial charges which temporarily depressed the pro-forma company’s earnings-per-share.