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Introduction & Market Context
Sherwin-Williams (NYSE:SHW) presented its second quarter 2026 results on July 28, 2026, delivering a strong performance that exceeded Wall Street expectations despite persistent softness in underlying demand. The paint and coatings manufacturer reported adjusted earnings of $3.70 per share on revenue of $6.79 billion, surpassing analyst estimates of $3.50 per share and $6.61 billion in sales. The stock surged 8.08% to $353.72, approaching its 52-week high of $379.65.
The results demonstrated the company’s ability to gain market share through strategic execution rather than relying on broad market improvement. Management emphasized that growth came from new account wins, pricing discipline, and operational excellence across all three reportable segments, even as residential new construction remained weak and DIY demand stayed muted.
Quarterly Performance Highlights
The company’s second quarter financial performance showed broad-based strength across key metrics. As detailed in the comprehensive quarterly overview, net sales increased 7.5% year-over-year to $6.79 billion, driven by mid-single digit price/mix improvement and low-single digit contributions from both volume and acquisitions.
Adjusted earnings per share of $3.70 represented a 9.5% increase from the prior year period of $3.38, while reported EPS grew even faster at 14.3% to $3.43. The company’s profitability metrics showed significant improvement, with adjusted EBITDA climbing 10.5% to $1.46 billion, representing 21.5% of net sales—a 60 basis point expansion from the prior year.
Gross margin came in at 49.2%, down 20 basis points from the prior year, though management noted the margin would have expanded excluding the dilutive impact of the Suvinil acquisition. Selling, general and administrative expenses increased 4.6% in absolute terms but improved as a percentage of sales, declining 90 basis points to 31.0%.
The company’s cash generation remained robust, with net operating cash flow increasing 21.1% to $1.35 billion. Free cash flow conversion reached 86.4%, enabling Sherwin-Williams to return $1.5 billion to shareholders through dividends and share repurchases during the quarter.
Paint Stores Group Performance
The Paint Stores Group, Sherwin-Williams’ largest segment, delivered solid results with sales increasing 5.1% to $3.89 billion. The growth was balanced between pricing and volume, with price/mix at the low end of mid-single digits and volume up low-single digits.
The segment’s standout performer was Protective & Marine, which posted mid-teens growth driven by strength in data centers, semiconductors, energy, and water-wastewater infrastructure. This marked the eighth consecutive quarter of at least high-single digit growth for the business, highlighting the segment’s exposure to favorable long-term secular trends.
Commercial business grew high-single digits through new business wins that drove above-market growth. Residential repaint, representing a significant portion of PSG sales, increased mid-single digits—the ninth time in the last ten quarters the business achieved at least mid-single digit growth. Property maintenance also contributed mid-single digit growth through new account wins and wallet share expansion.
New residential was the relative laggard, posting low-single digit growth as new account gains offset soft single-family completions. Segment profit increased 4.5% to $957.6 million, though margin compressed 20 basis points to 24.6% due to higher raw material costs and customer-focused growth investments. Management announced an 8% price increase effective September 1, 2026, to help offset inflationary pressures.
Consumer Brands Group Expansion
The Consumer Brands Group posted the strongest growth among the three segments, with sales surging 21.5% to $983.5 million. The Suvinil acquisition in Brazil contributed significantly to this performance, while the legacy business also showed improvement.
In North America, sales growth was fueled by new product offerings, favorable mix, and continued momentum in the Pro-Who-Paints channel, though DIY demand remained subdued. The EMEAI region faced headwinds from customer inventory management and a difficult comparison to the prior year’s high-teens growth. Excluding Suvinil, the legacy Latin America business grew low-double digits.
The segment’s profitability improved substantially, with adjusted segment profit increasing 33.1% to $241.4 million and adjusted segment margin expanding 210 basis points to 24.5%. This improvement reflected sales leverage, favorable timing of marketing investments, and supply chain productivity gains, which more than offset higher raw material costs and Suvinil integration expenses.
Performance Coatings Group Results
The Performance Coatings Group delivered balanced growth with sales increasing 6.3% to $1.91 billion. Price/mix, volume, and foreign exchange each contributed low-single digit growth, demonstrating the segment’s diversified end-market exposure.
Geographically, Asia led with high-teens growth, followed by mid-single digit growth in North America and low-single digit increases in both EMEAI and Latin America. All five divisions within PCG posted positive growth, with General Industrial and Auto Refinish each achieving high-single digit gains. General Industrial benefited from new business wins and strength in heavy machinery, while Auto Refinish saw double-digit growth in new accounts partially offset by softness in the core business.
Packaging grew mid-single digits driven by continued volume growth in the beverage can market. Both Coil and Industrial Wood posted mid-single digit growth, with Coil benefiting from strength across Asia, EMEAI, and North America, while Industrial Wood saw new account wins offset continued softness in furniture markets.
Adjusted segment profit increased 9.8% to $332.0 million, with adjusted segment margin expanding 50 basis points to 17.3%. The improvement was driven by sales leverage partially offset by higher raw material costs and customer-focused growth investments.
Financial Position & Liquidity
Sherwin-Williams maintained a strong financial position as of June 30, 2026, with substantial liquidity and manageable debt maturities. The company’s balance sheet provides flexibility for both organic growth investments and capital returns to shareholders.
The company held $293.5 million in cash and had $1.97 billion in net credit available from its total credit facilities of $4.79 billion. Total debt stood at $12.07 billion, with a weighted average interest rate of 3.61%. The debt structure is predominantly fixed-rate (77%), providing protection against interest rate volatility.
Key leverage metrics remained healthy, with total debt to trailing twelve-month EBITDA at 2.5x and net debt to trailing twelve-month adjusted EBITDA at 2.4x. These ratios provide substantial capacity for continued investment while maintaining investment-grade credit quality. Near-term debt maturities are well-laddered, with $1.5 billion due in 2027, $900 million in 2028, and $800 million in 2029.
Forward Guidance & Strategic Outlook
Based on the strong first-half performance, Sherwin-Williams raised its full-year 2026 guidance across multiple metrics. The updated outlook reflects confidence in continued market share gains and operational execution, even as management acknowledged that underlying demand conditions have not materially improved.
For the full year 2026, the company now expects consolidated sales to increase mid-to-high single digits, including a low-single digit contribution from acquisitions. By segment, Paint Stores Group is projected to grow mid-single digits, Consumer Brands Group mid-teens (driven by Suvinil), and Performance Coatings Group mid-single digits.
Adjusted earnings per share guidance was raised to a range of $11.80 to $12.20, compared to GAAP EPS guidance of $10.92 to $11.32. The difference reflects $0.81 per share in acquisition-related amortization and $0.07 per share in severance and restructuring expenses.
For the third quarter specifically, the company expects consolidated sales growth of mid-to-high single digits, with PSG up mid-single digits, CBG up low-twenties (again reflecting Suvinil), and PCG up low-to-mid single digits.
The detailed guidance breakdown reveals management’s expectations for balanced growth drivers. Consolidated volume is expected to increase low-single digits for both Q3 and the full year, with price/mix contributing mid-single digit growth. Foreign exchange is projected to add low-single digit growth for the full year but subtract slightly in Q3.
Management’s economic assumptions underlying the guidance reflect a cautious view of the macro environment. The company is not modeling Federal Reserve rate cuts, with a bias toward a potential fall rate hike due to elevated oil prices, a resilient labor market, and sticky inflation. Raw materials are expected to increase mid-single digits for the full year, with higher inflation in the second half. The company projects continued challenges in residential housing, with existing home sales in the low-single digit range and single-family starts down mid-to-high single digits.
Operational Efficiency & Non-GAAP Reconciliation
The company provided detailed reconciliations of its non-GAAP financial measures, offering transparency into the adjustments that bridge reported and adjusted results. These reconciliations are essential for investors seeking to understand underlying operational performance.
The adjusted EPS calculation shows that the $0.27 difference between reported EPS of $3.43 and adjusted EPS of $3.70 in Q2 2026 consists of $0.07 in after-tax severance and restructuring expenses and $0.20 in after-tax acquisition-related amortization. Free cash flow of $1.24 billion represented 86.4% conversion, calculated as net operating cash of $1.35 billion less capital expenditures of $108.4 million.
The EBITDA reconciliation demonstrates the company’s strong earnings quality, with adjusted EBITDA of $1.46 billion representing 21.5% of net sales. The primary adjustment to arrive at adjusted EBITDA from reported EBITDA of $1.43 billion was $24.4 million in severance and restructuring expenses.
Strategic Positioning & Market Context
Sherwin-Williams’ second quarter results underscore the company’s ability to execute its growth strategy independent of broad market conditions. Management’s commentary emphasized that growth is coming from "what we do, not from what the market gives us," highlighting the company’s focus on market share gains through new account wins, product innovation, and service excellence.
The company’s pricing power remains evident, with the announced 8% price increase in Paint Stores Group effective September 1, 2026. Management expects realization in the normal historical range of 60% to 70%, with some effects carrying into 2027 through customer contracts. This pricing action, combined with mid-single digit raw material inflation expectations, suggests the company is working to maintain margins in an inflationary environment.
The Suvinil acquisition continues to integrate successfully, contributing meaningfully to Consumer Brands Group growth while remaining an immaterial impact to consolidated EPS in 2026. Management’s disciplined approach to M&A was reinforced by the decision to walk away from a potential AkzoNobel acquisition, emphasizing that Sherwin-Williams "doesn’t need acquisitions to grow" given its substantial organic growth opportunities.
The company’s investment in growth initiatives across residential repaint, commercial, and Protective & Marine is yielding results, with these businesses consistently posting above-market growth rates. The completion of the store optimization program positions Sherwin-Williams to accelerate new store openings going forward, expanding its market-leading distribution network.
Despite the strong performance, management acknowledged ongoing challenges including weak residential new construction, muted DIY demand particularly among value-conscious consumers, and continued pressure in Europe. The company’s ability to grow through these headwinds demonstrates the resilience of its business model and the effectiveness of its strategic initiatives.
Full presentation:
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