Sherwin-Williams Q3 Sales Rise 7.9% as Margins Narrow

Sherwin-Williams (NYSE: SHW) reported a 7.9% increase in third-quarter 2026 sales, supported by price and mix, acquisitions, volume and foreign exchange. Profit growth was more modest as higher raw-material and supply-chain costs, the Suvinil acquisition and faster growth in lower-margin segments weighed on margins.

Net sales rose to $6.86 billion from $6.36 billion a year earlier, with all three reportable segments growing at or above the company’s guidance. Gross profit increased 4.9% to $3.28 billion, but gross margin declined 140 basis points to 47.8%. Sherwin-Williams said year-to-date gross margin was flat when excluding the dilutive effect of Suvinil.

Reported diluted earnings per share increased 0.9% to $3.38, while adjusted EPS rose 1.1% to $3.63. Adjusted EBITDA advanced 3.3% to $1.40 billion, though the adjusted EBITDA margin contracted 90 basis points to 20.5%.

Selling, general and administrative expenses increased 6% to $2.07 billion, driven by incremental Suvinil costs and higher employee-related service costs. As a percentage of sales, however, SG&A declined 50 basis points to 30.2%, and the company said it implemented further efficiencies.

Paint Stores sales rise as margins narrow

Paint Stores Group sales grew 4.7% to $4.02 billion, reflecting mid-single-digit price and mix growth and low-single-digit volume growth. Segment profit increased 2.1% to $974.3 million, while the segment margin declined 60 basis points to 24.3% as higher sales were partly offset by raw-material and supply-chain costs and investments in additional stores and sales representatives.

Protective and Marine recorded at least high-single-digit growth for a ninth consecutive quarter, supported by AI infrastructure, energy, water treatment and processing demand. Commercial sales benefited from new-business wins, while Residential Repaint posted at least mid-single-digit growth for the 10th time in 11 quarters. Property Maintenance remained affected by uneven apartment turnover activity and delayed capital projects.

The company said New Residential outperformed a market backdrop that included a high-single-digit decline in single-family completions. Sherwin-Williams also implemented an 8% price increase in the group effective Sept. 1, 2026.

Suvinil boosts Consumer Brands sales but pressures profitability

Consumer Brands Group sales increased 21.7% to $937.4 million, primarily reflecting a low-20% contribution from acquisitions. Price and mix and foreign exchange each contributed low-single-digit growth, while volume declined at a mid-single-digit rate.

The group’s segment profit fell 7.1% to $146.2 million, with margin dropping 480 basis points to 15.6%. Adjusted segment profit decreased 4.4% to $171.4 million, and adjusted margin contracted 500 basis points to 18.3%. Sherwin-Williams attributed the declines mainly to higher raw-material and supply-chain costs, incremental SG&A associated with Suvinil and unfavorable foreign-currency transaction effects.

North American sales benefited from new products, favorable mix and the Pro-Who-Paints business, although do-it-yourself demand remained muted. Europe grew through new-business gains, while the legacy Latin American business excluding Suvinil posted low-single-digit growth. The Suvinil acquisition reached its one-year anniversary on Oct. 1.

Performance Coatings grows across divisions and regions

Performance Coatings Group sales rose 8.8% to $1.90 billion, exceeding company guidance as price and mix increased at a mid-single-digit rate and both volume and foreign exchange added low-single-digit growth. Sales were positive across all divisions and geographies.

Segment profit increased 6.2% to $255.2 million, but margin declined 30 basis points to 13.4%. Adjusted segment profit rose 4.7% to $308.7 million, with adjusted margin down 70 basis points to 16.2%.

General Industrial benefited from construction equipment and transportation demand, while Packaging recorded strong volume and its eighth quarter in the past nine with at least high-single-digit sales growth. Industrial Wood business wins in building products were partly offset by weakness in furniture and flooring. Auto Refinish remained pressured by higher insurance premiums, softer claims activity and weak consumer confidence.

Cash flow and 2026 outlook

Third-quarter net operating cash declined 15.5% to $1.10 billion because of lower net income and greater working-capital use. Year-to-date operating cash nevertheless increased 10% to $2.6 billion. Free cash flow for the quarter was $975.8 million, representing 70.2% of EBITDA.

Sherwin-Williams returned $749 million to shareholders through dividends and share repurchases during the quarter and $3 billion during the first nine months of 2026. At Sept. 30, the company had $264.2 million in cash, $2.32 billion of net available credit and a net-debt-to-trailing-12-month adjusted EBITDA ratio of 2.4 times.

For full-year 2026, management expects consolidated sales to increase by a mid-single-digit percentage. Paint Stores sales are projected to rise at a mid-single-digit rate, Consumer Brands at a low-single-digit rate and Performance Coatings at a mid- to high-single-digit rate. Adjusted EPS is expected to be $11.85 to $12.15, compared with projected GAAP EPS of $10.92 to $11.22.

Fourth-quarter sales are expected to grow at a mid- to high-single-digit rate, including a low-single-digit contribution from acquisitions. Management anticipates mid-single-digit raw-material inflation versus the prior year and approximately $550 million of capital expenditures for 2026.

The outlook remains subject to risks including economic conditions, inflation, interest rates, raw-material and energy costs, supply-chain disruptions, foreign-exchange movements, tariffs, acquisition integration and demand weakness in cyclical end markets.