What Sherwin-Williams (SHW) Said on Its Q3 Earnings Call

Key Points

• Third-quarter sales grew at a high-single-digit rate, with volume rising for the third consecutive quarter, but adjusted EPS increased only about 1% and EBITDA margins were pressured by raw-material, supply-chain, acquisition and service costs.
• Paint Stores and industrial businesses delivered broad-based gains, including strong Protective & Marine and Performance Coatings growth. Consumer Brands sales benefited from the Suvinil and Do it Best acquisitions, but muted DIY demand and acquisition-related costs drove a mid-single-digit volume decline and lower margins.
• Sherwin-Williams narrowed its 2026 adjusted EPS outlook to $11.85–$12.15 while maintaining the $12 midpoint. Management expects demand to remain choppy in 2027, alongside raw-material inflation, but is targeting approximately $75 million in cost savings.

Sherwin-Williams NYSE: SHW reported high-single-digit consolidated sales growth in the third quarter of 2026, supported by mid-single-digit price mix gains, low-single-digit contributions from acquisitions and volume growth. The company said it delivered volume growth for the third consecutive quarter despite continued softness and uneven demand across its end markets.

Adjusted diluted earnings per share rose about 1% in the quarter, while adjusted EBITDA increased 3.3% to $1.4 billion. Adjusted EBITDA margin was 20.5%, within the company’s targeted range. However, executives said the conversion of sales growth into earnings was below their standards, reflecting raw-material and supply-chain cost pressures, acquisition-related dilution and higher service costs associated with stronger sales.

“Our third quarter sales performance reflects the strength of our strategy and the value customers are placing on our products and services,” Chair, President and Chief Executive Officer Heidi Petz said. She added that the company was pursuing further efficiency initiatives after actions taken during the third quarter and previously disclosed measures were expected to produce roughly $25 million of 2026 savings.

Margins pressured by costs and business mix

Reported gross margin was affected by higher raw-material and supply-chain costs, dilution from the Suvinil acquisition and faster growth in lower-margin reportable segments, according to Senior Vice President of Investor Relations and Communications Jim Jaye. Excluding Suvinil, gross margin was flat year to date.

Chief Financial Officer Ben Meisenzahl said approximately half of the gross-margin pressure stemmed from price-cost dynamics and supply-chain costs, while the remainder was attributable to business mix, including Suvinil and growth in lower-gross-margin businesses in the Performance Coatings Group and Consumer Brands Group.

The company’s reported SG&A expenses increased by a mid-single-digit percentage but declined 50 basis points as a percentage of sales. The increase reflected Suvinil-related costs and higher employee service costs, including expenses for sales representatives, stores and technical support needed to service sales that exceeded the company’s earlier expectations.

Sherwin-Williams said its 8% Paint Stores Group price increase, effective Sept. 1, was tracking as planned and should reach its historical realization range in the first half of 2027. Meisenzahl said the company would continue to adjust prices as needed based on its cost basket, but emphasized that it would also use cost actions and simplification initiatives rather than rely solely on pricing.

Paint Stores and industrial businesses gain share

The Paint Stores Group recorded mid-single-digit sales growth, with mid-single-digit price mix improvement and low-single-digit volume growth. Sales increased across all professional segments.

Protective & Marine sales rose by a mid-teens percentage, marking the ninth consecutive quarter of at least high-single-digit growth. Petz cited demand from AI infrastructure, energy, water treatment, manufacturing and processing, adding that many projects can create future maintenance-related recurring revenue.

Commercial sales rose by high single digits, while residential repaint sales increased by mid-single digits against a high-single-digit comparison. Property maintenance and new residential sales each grew by low single digits. New residential growth came despite single-family completions falling by a high-single-digit percentage during the quarter, the company said.

The company opened 57 gross new stores year to date, offset by planned closures. Sherwin-Williams expects to return to its typical range of 80 to 100 net new stores beginning in 2027.

Performance Coatings Group sales exceeded the company’s expectations, with growth in every division and region. Volume rose at the high end of low single digits, price mix increased by mid-single digits and foreign exchange provided a low-single-digit tailwind. General industrial sales grew by a mid-teens percentage, packaging sales increased by a low-double-digit percentage, and coil sales also rose by a low-double-digit percentage.

Petz said the company expects Performance Coatings volume growth to continue, citing what she characterized as record-high new-business wins and a healthy pipeline.

Consumer Brands affected by acquisitions and muted DIY demand

Consumer Brands Group sales increased as expected, primarily due to the Suvinil and Do it Best acquisitions. Low-single-digit price mix improvement and foreign-exchange benefits were partly offset by a mid-single-digit volume decline.

North American sales increased by low single digits, aided by favorable mix, product launches and growth in the “Pros Who Paint” customer segment, while DIY demand remained muted. Europe grew by mid-single digits on share gains, and legacy Latin America sales, excluding Suvinil, rose by a low-single-digit percentage.

Adjusted segment profit and margin declined due to higher raw-material and supply-chain costs, Suvinil-related SG&A expenses and unfavorable foreign-currency transaction gains and losses. Meisenzahl said Suvinil accounted for about 70% of the Consumer Brands Group’s 430-basis-point adjusted gross-margin decline. Excluding acquisitions, Consumer Brands Group’s adjusted segment margin was in the low-20% range.

Outlook narrowed; 2027 expected to remain choppy

Sherwin-Williams narrowed its full-year 2026 adjusted diluted EPS outlook to $11.85 to $12.15 per share, while maintaining the prior midpoint of $12. The company said its fourth-quarter sales guidance reflects normal seasonality.

For 2027, the company expects “softer for longer” demand conditions and continued choppiness in most end markets. It expects low- to mid-single-digit raw-material inflation, with the greatest year-over-year impact in the first half of the year. Energy, fuel, health care, wages, technology and software licensing are also expected to inflate.

The company anticipates approximately $75 million in 2027 cost savings, including $25 million tied to restructuring actions announced in the second and third quarters of 2026 and potential fourth-quarter actions still under review. Sherwin-Williams said it will provide a more detailed 2027 outlook during its January earnings call.

Net operating cash flow rose 10%, or $232 million, year to date. The company returned $749 million to shareholders during the quarter and $3 billion year to date through dividends and share repurchases. It ended the quarter with a net debt-to-adjusted EBITDA ratio of 2.4 times.

About Sherwin-Williams (NYSE:SHW)

The Sherwin-Williams Company NYSE: SHW develops, manufactures, distributes and sells paints, coatings and related products. Its offerings include architectural paints, industrial coatings, wood finishes, protective coatings, automotive refinishing products, floor coatings and related supplies marketed under brands such as Sherwin-Williams, Valspar, Minwax, Krylon and Dutch Boy.

Founded in 1866 and headquartered in Cleveland, Ohio, Sherwin-Williams serves professional contractors, do-it-yourself consumers, industrial manufacturers, commercial businesses and other customers.

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