Sherwin-Williams Q4 Earnings Call Highlights

Key Points

• Sherwin-Williams finished 2025 with record consolidated sales and adjusted diluted EPS despite a “softer for longer” demand backdrop; Q4 sales rose mid-single-digits, adjusted EPS +6.7%, adjusted EBITDA +13.4% (17.7% margin), and full-year free cash flow was $2.7 billion with 90.1% FCF conversion in the quarter.
• The company guided 2026 to low- to mid-single-digit sales growth and adjusted diluted EPS of $11.50–$11.90 (ex-acquisition amortization), targeting gross-margin expansion via pricing and supply‑chain simplification while flagging higher interest expense and plans to open 80–100 net new stores.
• Operationally, Paint Stores margin expanded and Performance Coatings improved 150 bps from cost discipline and new business wins; Sherwin-Williams will reinstate the 401(k) match Feb. 1 and expects about $46 million of cost savings in 2026 (vs. ~$40 million in 2025).

Sherwin-Williams NYSE: SHW executives told investors the company finished 2025 with a “strong” fourth quarter despite a demand environment that management repeatedly described as “softer for longer,” and provided initial guidance calling for low- to mid-single-digit sales growth and higher earnings in 2026.

On the company’s earnings call, management said fourth-quarter consolidated sales rose by a mid-single-digit percentage and included a low single-digit contribution from the recently acquired Suvinil business. Adjusted diluted earnings per share increased 6.7% in the quarter, while adjusted EBITDA grew 13.4% and expanded 100 basis points to 17.7% of sales. Free cash flow conversion in the quarter was 90.1%, the company said.

2025 results: record sales and earnings amid weak demand

Chair, President, and CEO Heidi Petz said the company delivered “record full-year consolidated sales and record adjusted diluted earnings per share” even though there was “no meaningful improvement in demand across our end markets.” She said the company focused on share gains, targeted investments, and cost control rather than waiting for a market recovery.

For 2025, Petz highlighted cash generation and capital returns:

• Net operating cash grew 9.4% to $3.5 billion, or 14.6% of sales.
• Free cash flow was $2.7 billion, with 59% free cash flow conversion for the year.
• The company returned $2.5 billion to shareholders through share repurchases and dividends, and raised the dividend for the 47th consecutive year.
• Net debt to adjusted EBITDA ended 2025 at 2.3x, which management characterized as a strong balance sheet position.

Petz also noted the opening of Sherwin-Williams’ new global headquarters and Global Technology Center at the end of the year, calling the move-in “extremely” smooth and describing the facilities as a long-planned investment to support collaboration and innovation.

Segment performance: Paint Stores margin expands; Performance Coatings stands out

In the fourth quarter, management said Paint Stores Group sales increased within expectations, led by high single-digit growth in Protective and Marine against a high single-digit comparison. Residential Repaint remained “solid,” with growth slightly below the mid-single-digit range, also against a high single-digit comparison. Paint Stores Group results included low single-digit positive price mix that was partially offset by a low single-digit decrease in volume. Segment margin expanded 90 basis points to 20.8%.

Consumer Brands Group sales exceeded the company’s expectations, helped by Suvinil and low single-digit foreign exchange benefits, though price mix and volume were each down less than 1%. Management said underlying sales excluding Suvinil were “essentially flat,” which was better than expected. Adjusted segment margin declined due to Suvinil’s impact and transaction-related items; management said margin increased when excluding those impacts.

Performance Coatings Group sales were at the high end of expectations in the quarter, driven by Packaging and Auto Refinish. Adjusted segment margin improved 150 basis points to 19%, which management attributed to new business wins and SG&A control, with SG&A down by a mid-single-digit percentage.

Responding to analyst questions about Performance Coatings margins, Petz and CFO Ben Meisenzahl emphasized “discipline,” simplification efforts to remove complexity, and tight SG&A management. Meisenzahl said the segment’s adjusted operating margin improved in the second half of the year after being down about 100 basis points in the first half, and he described the fourth-quarter improvement as a result of sustained cost control.

401(k) match reinstated; cost control remains a theme

Petz said Sherwin-Williams will reinstate its 401(k) matching program for eligible U.S. employees effective February 1 and will restore matching contributions that had been paused since October 1 by the end of the first quarter. She said the pause was implemented after other cost initiatives and restructuring actions, and framed the decision as a choice to “protect jobs” rather than pursue further workforce reductions.

Management said the decision was enabled by elevated performance, accelerated cost reductions, and the fact that some risks anticipated in mid-2025 “did not materialize or were less severe than expected,” including delayed tariff impacts.

Meisenzahl also discussed SG&A expectations for 2026, reiterating the company’s forecast for GAAP SG&A dollars to rise by a low single-digit percentage, including a low single-digit contribution from Suvinil. He said cost actions taken in 2025 generated about $40 million in savings, and that the company now expects approximately $46 million in savings in 2026.

2026 outlook: low- to mid-single-digit sales growth and EPS guidance

Management said the demand environment entering 2026 “feels much like it did a year ago” and that the “softer for longer” dynamic is expected to persist well into 2026. Petz cited muted consumer sentiment, uncertainty around existing home sales forecasts, continued pressure in new residential construction, and ongoing weakness in several industrial indicators including manufacturing PMIs.

The company provided full-year 2026 guidance for diluted net income per share of $10.70 to $11.10. Excluding acquisition-related amortization expense of approximately $0.80 per share, management guided to adjusted diluted net income per share of $11.50 to $11.90, which would be up 2.4% at the midpoint versus 2025’s adjusted diluted EPS of $11.43. Consolidated sales are expected to rise by a low- to mid-single-digit percentage.

Additional items discussed as part of the 2026 framework included:

• A 7% Paint Stores Group price increase effective January 1, with realization expected to be low single-digit given market dynamics and mix.
• Targeted price increases in Consumer Brands and Performance Coatings.
• Raw materials expected to increase by a low single-digit percentage, including tariff impacts and inflation in select commodities.
• Expectation for full-year gross margin expansion driven by pricing and “accelerated simplification efforts” across the supply chain.
• Higher interest expense, including about $40 million related to lease payments for the new headquarters, about $35 million tied to a $1.1 billion delayed draw term loan, and about $15 million from refinancing at higher rates.
• Plans to open 80 to 100 net new stores in the U.S. and Canada in 2026.

Petz said management views its initial 2026 guidance as “very realistic” and added that if end markets perform better than the company currently expects, Sherwin-Williams would expect to outperform the guidance. Management also said it does not plan to update full-year guidance until after the second quarter due to the seasonality of the first quarter.

About Sherwin-Williams NYSE: SHW

Sherwin-Williams NYSE: SHW is a global manufacturer and distributor of paints, coatings and related products. Founded in 1866 and headquartered in Cleveland, Ohio, the company supplies a broad range of coatings for residential, commercial and industrial applications. Its product offering includes architectural paints and stains, industrial and protective coatings, automotive finishes, and a variety of sundry products such as primers, sealants and specialty treatments used by professionals and consumers.

The company sells through multiple channels, including a large network of company-operated retail paint stores that serve professional contractors and do-it-yourself consumers, as well as through distributors and mass retailers.

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