Sherwin-Williams Earnings Call: Record Profits, Cautious 2026

Sherwin-Williams ((SHW)) has held its Q4 earnings call. Read on for the main highlights of the call.

Sherwin-Williams Balances Record Results With Cautious Outlook in 2025 Earnings Call

Sherwin-Williams’ latest earnings call painted a picture of a company executing extremely well in a difficult environment. Management highlighted record sales, record adjusted EPS and strong margin expansion in 2025, alongside robust cash generation and disciplined cost control. At the same time, they were clear that demand remains weak across many end markets, raw material and tariff pressures are building, and higher interest costs will weigh on results. Guidance for 2026 was realistic rather than aggressive: modest sales and earnings growth driven more by pricing, productivity and strategic initiatives than by a cyclical demand recovery.

Record Full-Year Sales and EPS Underscore Resilience

Sherwin-Williams delivered record full-year consolidated sales and record adjusted diluted net income per share, with 2025 adjusted EPS reaching $11.43. Management framed this as especially notable given the “softer for longer” demand environment, suggesting that operational execution, pricing and mix management rather than volume growth were the key drivers. Looking ahead, the midpoint of the 2026 adjusted EPS guidance at $11.70 implies 2.4% growth versus 2025, excluding acquisition amortization, signaling continued—if modest—earnings progress despite the macro headwinds.

Quarterly Margin Expansion Highlights Strong Profitability

Fourth-quarter results reinforced the full-year story of improving profitability. Adjusted EBITDA grew 13.4% year over year in Q4, while adjusted EBITDA margin expanded by 120 basis points to 17.7% of sales. Adjusted diluted EPS increased 6.7% in the quarter, underscoring that Sherwin-Williams is widening its profit pool even as volumes remain pressured. Management credited pricing discipline, mix improvements and ongoing productivity efforts for the margin gains.

Robust Cash Generation Fuels Shareholder Returns

Cash generation remained a standout. Full-year net operating cash rose 9.4% to $3.5 billion, representing 14.6% of sales, while free cash flow reached $2.7 billion with a 59% conversion rate for the year and a very strong 90.1% in Q4. This cash supported significant capital returns: $2.5 billion was returned to shareholders via share repurchases and dividends, and the company raised its dividend for the 47th consecutive year. The combination of strong free cash flow and consistent capital returns underpins Sherwin-Williams’ shareholder-friendly profile.

Paint Stores Group Shows Resilience and Margin Gains

The Paint Stores Group demonstrated resilience against a challenging backdrop. Q4 sales for the segment grew in line with expectations, with protective and marine coatings up high single digits and residential repaint rising just below mid-single digits versus a tough comparison. Segment margin expanded by 90 basis points to 20.8% in the quarter, assisted by low-single-digit positive price/mix. These results show that core professional and protective markets are holding up relatively well and that the company continues to extract more profitability from its extensive store network.

Performance Coatings Delivers Strong Execution Despite Industrial Weakness

Performance Coatings Group sales landed at the high end of expectations in Q4, and profitability clearly improved. Adjusted segment margin rose 150 basis points to 19%, driven by new business wins and tight SG&A control, with SG&A down mid-single digits in the quarter. Packaging coatings grew at the high end of high single digits for the year, partially offsetting ongoing softness in other industrial categories. Overall, the segment’s performance underscored Sherwin-Williams’ ability to gain share and defend margins even as industrial end markets remain under pressure.

Suvenil Integration Begins, Supporting Strategic Growth

Sherwin-Williams completed the acquisition of Suvenil and delivered its first full quarter including the new business. The acquisition, along with foreign exchange, contributed to Q4 upside in the Consumer Brands business. Management positioned Suvenil as a strategic growth platform in Brazil and broader Latin America, reinforcing the company’s long-term international expansion ambitions. While near-term integration and purchase accounting impacts are dilutive, Sherwin-Williams’ message was that Suvenil is an important lever for future regional growth.

Tight Administrative Cost Discipline Supports Margins

Administrative SG&A continued to reflect disciplined cost control. In Q4, administrative SG&A decreased in the low single digits, even including roughly $2 million of one-time restructuring costs. Excluding restructuring and non-annualized operating costs tied to the new headquarters building, administrative SG&A declined in the low teens and improved sequentially versus Q3. This discipline in overhead spending is an important component of Sherwin-Williams’ margin expansion strategy as revenue growth remains modest.

Consumer Brands Segment Still Dragged by Weak DIY Demand

While the Suvenil acquisition added to reported results, underlying Consumer Brands performance was soft. Excluding Suvenil, full-year Consumer Brands sales declined in the low single digits, driven by weak North American DIY demand and unfavorable currency impacts. Segment margins also contracted, reflecting both Suvenil-related dilution and lower production volumes, which hurt fixed-cost absorption. Management’s commentary suggested that consumer and DIY channels remain a weak spot and are unlikely to provide a near-term growth engine.

Industrial End Markets Remain a Headwind

Industrial demand remained challenging for the Performance Coatings business across 2025. Full-year segment sales were essentially flat, with coil coatings down low single digits due to steel-related tariffs and both industrial wood and general industrial coatings also declining low single digits. While Sherwin-Williams emphasized share gains and margin improvements in parts of the portfolio, the industrial backdrop is clearly a drag and is expected to remain subdued, limiting top-line momentum.

Raw Material and Tariff Pressures Cloud Margin Outlook

The company signaled that cost pressures are set to rise again. Management expects its raw material basket to increase by a low single-digit percentage in 2026, driven by tariffs and selective commodity inflation. These factors will create margin pressure that must be offset by price increases, product mix and simplification initiatives. Sherwin-Williams remains confident it can still expand gross margins, but the message was clear: cost headwinds are returning and will require continued execution on pricing and productivity.

Higher Interest and Financing Costs Weigh on Earnings

Interest and financing costs are moving noticeably higher. In 2026, Sherwin-Williams expects roughly $90 million of incremental interest expense, including about $40 million tied to lease payments on its new headquarters, $35 million related to a $1.1 billion delayed-draw term loan, and $15 million associated with refinancing activities. These increased costs will push up GAAP SG&A and net interest expense, making EPS growth more challenging even as operating performance improves.

Acquisition-Related Dilution to Persist Until Late 2026

Suvenil, while strategically important, is currently dilutive to earnings. The acquisition caused EPS dilution in both Q4 and the full year due to closing costs and purchase accounting adjustments. Management cautioned that integration costs and margin “noise” will continue until Suvenil is fully annualized in the third quarter of 2026. Investors are being asked to look through these near-term impacts in anticipation of the longer-term growth and margin benefits expected from the expanded Latin American footprint.

Housing and Residential Dynamics Still Unfavorable

Residential and new construction trends remain a significant overhang. Management expects the new residential market to be down at least mid-single digits in 2026, reflecting negative single-family housing starts and affordability challenges. Mortgage-rate lock-in and muted consumer sentiment are also constraining DIY and new residential demand. While repaint and maintenance activity in the professional channel is steadier, the overall housing backdrop is not providing the usual cyclical tailwind that has historically aided Sherwin-Williams.

Volume Pressure Despite Pricing Actions

Volumes in the Paint Stores Group remain under pressure even as the company pushes through price increases. In Q4, overall volumes in the segment declined in the low single digits, while price/mix was positive in the low single digits. Management implemented a 7% price increase effective January 1 in its stores, but expects actual realization to be only in the low single digits due to competitive dynamics and customer negotiations that delay or reduce full pass-through. This highlights the delicate balance between protecting margins and maintaining share in a sluggish market.

“Softer for Longer” Demand Sets the Backdrop

Throughout the call, management reiterated its view that demand across key end markets is likely to remain soft well into 2026. There is no expectation of a broad-based volume recovery near term, meaning Sherwin-Williams must rely on price, mix, cost control and strategic initiatives rather than robust top-line growth. This “softer for longer” narrative underscores why 2026 guidance is framed as modest and why management continues to stress operational levers rather than macro optimism.

Practical, Positive Guidance Points to Modest 2026 Growth

Sherwin-Williams’ 2026 guidance reflects cautious optimism grounded in operational control rather than a strong demand rebound. Management forecast consolidated sales to rise by a low- to mid-single-digit percentage and GAAP diluted EPS to land between $10.70 and $11.10. Adjusted EPS is expected in the $11.50–$11.90 range, excluding $0.80 of acquisition-related amortization, with the midpoint of $11.70 representing about 2.4% growth over 2025’s $11.43. The company anticipates a low-single-digit increase in GAAP SG&A dollars, including a modest contribution from Suvenil, a low-single-digit increase in raw material costs, and full-year gross margin expansion despite these headwinds. Sherwin-Williams plans to open 80–100 net new stores in the U.S. and Canada, maintain its net debt-to-adjusted EBITDA leverage within the 2.0–2.5x target range, continue opportunistic share repurchases, and support a modest 1.3% dividend increase. Management’s tone suggested confidence in achieving these targets through pricing, mix, productivity and strategic growth investments, rather than relying on a cyclical upswing.

Sherwin-Williams’ earnings call presented a company delivering record profitability and strong cash returns in an environment still defined by weak demand, rising costs and housing headwinds. Investors heard a balanced message: near-term growth will be modest, pressured by raw materials, tariffs, higher interest and integration costs, while core businesses like Paint Stores and Performance Coatings continue to expand margins. With a realistic 2026 outlook, ongoing store expansion, disciplined SG&A management and strategic bets like Suvenil, Sherwin-Williams remains positioned as a steady compounder for long-term investors, albeit one facing a “grind it out” year rather than a surge in growth.