Very Good Earnings from Sherwin-Williams, Decent Earnings from ADS

We have four Buy List earnings reports today. Two of our stocks, Sherwin-Williams (SHW) and Alliance Data Systems (ADS) reported before the bell.

Let’s start with the good news. Sherwin Williams reported Q4 earnings of $2.34 per share which easily beat Wall Street’s consensus of $2.21 per share. I guess last quarter was very good for paint.

SHW had quarterly revenue of $2.78 billion which beat estimates of $2.69 billion. For all of 2016, Sherwin-Williams made $12.45 per share on revenue of $11.86 billion.

Now for guidance. For Q1, SHW sees earnings ranging between $2.03 and $2.13 per share, and they see sales rising by mid-to-high single digits. Wall Street had been expecting $1.95 per share. For all of 2017, they see earnings between $13.60 and $13.80 per share and sales rising by mid-single digits. Wall Street had been expecting $13.63 per share.

“We continue to generate significant cash from operations allowing us to invest in the business and return a substantial portion to our shareholders. In 2016, we generated net operating cash flow of $1.31 billion. In 2016, we added 94 net new stores, finishing the year with 4,180 stores in operation. During the year, we increased our annual cash dividend 25% to $3.36 per common share. Our balance sheet remains flexible and is positioned well for the anticipated Valspar acquisition and other investments in our business.

“We now expect a divestiture will be required to gain approval from the FTC to complete the acquisition of Valspar. We are moving forward on a divestiture that we believe will allow us to gain approval from the FTC. The expected divestiture has revenues below the $650 million threshold, and we expect to negotiate the divestiture and complete the Valspar transaction at $113 per common share within 90 days.

Shares of SHW have been up as much as 8.4% this morning.

Alliance Data Systems reported Q4 earnings of $4.67 per share, which was one penny above expectations. The downside is that revenues came in at $1.83 billion which fell short of Wall Street’s estimate of $1.94 billion. For all of 2016, ADS made $16.92 per share and revenue was $7.14 billion.

“Our biggest success in 2016 was the ability to grow core EPS double-digits despite a 12 point drag on growth from credit normalization. We remain on-track for solid growth again in 2017, and expect to complete the credit normalization process towards the end of the year.”

Heffernan continued, “Consistent with our announcement in October 2016 of our intention to offer a balanced approach to return capital to shareholders through a combination of dividends and share repurchases, our board of directors today declared our second quarterly dividend of $0.52 with a record date of February 15.”

For 2017, ADS expects earnings of $18.50 per share on sales of $7.7 billion. That’s a little below the Street’s consensus of $18.68 per share and revenue of $7.95 billion.

The stock was down 5.5% this morning but has recovered some and is now down about 3%.

Microsoft (MSFT) and CR Bard (BCR) will report after the close.

Posted by on January 26th, 2017 at 10:19 am

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