Sherwin Cuts Outlook on Costs From $9.3 Billion Valspar Deal
Sherwin-Williams, PPG Decline as Consumer Paint Demand Fizzles
(Bloomberg) -- Sherwin-Williams Co. reduced its full-year profit outlook because of costs related to its $9.3 billion acquisition of Valspar Corp., sending shares plunging in early trading.
Earning will rise to $12.30 to $12.70 a share in 2017, the Cleveland-based paint company said Thursday in a statement. The forecast includes an expense of $2.50 a share related to the purchase, which will be partially offset by a gain of 75 cents to 95 cents from Valspar operations. Sherwin previously forecast earnings of as much as $13.85.
The reduced outlook caught analysts and investors by surprise. Analysts had anticipated full-year profit of $14.75 a share. Investors fled the stock, sending it down as much as 5.2 percent to $340 before the start of regular trading.
The Valspar deal, which closed on June 1, propelled Sherwin past PPG Industries Inc. and Akzo Nobel NV as the largest paint and coatings maker. Sherwin, whose brands include Minwax Wood Finish, agreed in April to sell Valspar’s North American wood-coatings business to Axalta Coatings Systems Ltd. for $420 million to satisfy regulators.
Sherwin also reported second-quarter earnings that trailed expectations because of lower-than-anticipated sales at company-owned stores, Ghansham Panjabi, an analyst at R.W. Baird, said in a note. Still, the predicted gains from Valspar and company’s commentary on pricing are encouraging, he said.
To contact the reporter on this story: Jack Kaskey in Houston at jkaskey@bloomberg.net.
To contact the editors responsible for this story: Brendan Case at bcase4@bloomberg.net, Bruce Rule, Mark Schoifet