Vivek Kumar
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Morgan Stanley raised their stock price forecast on Sherwin-Williams to $315 from $275 due to the confluence of solid first-quarter earnings results and continued momentum in HIRS/P&WP sales.

The investment bank said they expect shares to trade well leading up to the June 8 investor day where it believes 2021 guidance will be raised and an attractive longer-term outlook will be provided.

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The leading global producer of paints and coatings for various architectural and industrial applications late last month reported first-quarter adjusted earnings of $2.06 a share, beating the Wall Street consensus estimate of $1.64 a share.

The largest seller of paints in the North American residential market said its sales jumped to $4.67 billion from $4.15 billion. That was higher than the market expectations of $4.52 billion.

“Increasing conviction in our above-consensus 2021/2022 Sherwin SSS/EPS forecasts following the results of our Fall 2021 contractor survey as well as other recent data points (HIRS/P&WP/PPI). Recent management commentary about customer backlog and market share gains also supportive,” noted Vincent Andrews, equity analyst at Morgan Stanley.

Sherwin-Williams’ shares rose over 16% so far this year.

Fourteen analysts who offered stock ratings for Sherwin-Williams in the last three months forecast the average price in 12 months at $302.93 with a high forecast of $325.00 and a low forecast of $282.97.

The average price target represents a 5.89% increase from the last price of $286.09. Of those 14 equity analysts, 11 rated “Buy”, three rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley gave the bull-case scenario target price of $390 and the worst-case scenario forecast of $225.

“The step-up in-home renovation during COVID will continue post-COVID as discretionary spending is reallocated to the home. A COVID-inspired new paint cycle has begun which will transcend the do-it-yourself (DIY) frenzy of lockdown in the US / post-lockdown in the EU to a significant 2021 order book for do-it-for-me (DIFM) paint demand (i.e., 2021 base case SSS of 12.5%).

“Market share gains likely to continue due to superior service offering (outstanding employees, vertical integration/logistics, sophisticated online platform, 3,000 company-owned trucks for delivery) and digital/data analytics. Significant pricing in 2021 likely sticky in 2022 when raw materials deflate.,” Morgan Stanley’s Andrews added.

Other equity analysts also recently updated their stock outlook. Sherwin-Williams had its price objective hoisted by BMO Capital Markets to $300 from $278. The firm presently has an “outperform” rating on the specialty chemicals company’s stock.

Moreover, Jefferies Financial Group reaffirmed a “hold” rating and set an $800 price target. Argus boosted their price target to $325 from $263 and gave the company a “buy” rating.

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