CWS Market Review – July 26, 2019
Posted by Eddy Elfenbein on July 26th, 2019 at 7:08 am

“The market is fond of making mountains out of molehills and exaggerating ordinary vicissitudes into major setbacks.” – Benjamin Graham

Earnings and more earnings. That’s what this week has been all about. This week, we had ten Buy List earnings reports to digest. Fortunately, most were pretty good and that helped make up for last week’s debacle from Eagle Bank.

Raytheon blew past estimates and raised guidance. So did Stryker. Sherwin-Williams beat by 20 cents per share. Torchmark beat estimates and announced a name change! On August 8, Torchmark will become Global Life and the new ticker will be GL.

We also have a bunch of earnings to preview next week. If that’s not enough, there’s a big Federal Reserve meeting next week. There’s a lot to get to so let’s jump into this week’s issue of CWS Market Review.

Ten Buy List Earnings Reports This Week

Here’s our updated Earnings Calendar for Q2:

Let’s start with RPM International (RPM) which reported on Monday. This was for their fiscal fourth quarter which ended in May. For Q4, RPM made $1.24 per share. That was 10 cents more than estimates.

This was a very good quarter for RPM. Net sales rose by 2.8% to $1.6 billion. Unfortunately, they were dinged a bit by forex but you really can’t avoid that. The company sees 2020 earnings of $3.30 to $3.42 per share.

The stock gapped up to a new all-time high this week. Since the end of May, RPM is up 25% for us. I’m raising our Buy Below on RPM to $71 per share.

On Tuesday, Sherwin-Williams (SHW) said it made $6.57 per share for its Q2. That beat estimates by 20 cents per share.

For the quarter, consolidated net sales rose 2.2% to $4.88 billion. Net sales in stores open more than a year rose by 4.3%. Sherwin stood by its full-year EPS guidance of $20.40 to $21.40 per share. I’m so glad we held onto this one.

On Wednesday, the shares broke above $500 for the first time. I’m raising our Buy Below on Sherwin to $513 per share.

We had three Buy List earnings reports on Wednesday. Before the bell, Check Point Software (CHKP) said it made $1.38 per share. That beat estimates by one penny per share. Revenues rose 4% to $488 million which matched expectations.

“Second quarter results were driven by 13 percent growth in our security subscriptions revenues, which included our advanced threat prevention and our CloudGuard family of products,” said Gil Shwed, Founder and CEO of Check Point Software Technologies.

“We continued to expand our product offerings during the second quarter with the introduction of new technologies which included Malware DNA, a new artificial intelligence-based engine that accelerates zero-day threat prevention, and CloudGuard Log.ic, providing threat protection and context-rich security intelligence.”

Now for guidance. For Q3, Check Point sees EPS ranging between $1.36 and $1.44 on revenue of $480 to $500 million. For the entire year, CHKP projected earnings between $5.85 and $6.25 per share and revenue between $1.94 and $2.04 billion. I’m very pleased with this stock. Check Point remains a buy up to $120 per share.

After the close on Wednesday, Cerner (CERN) announced Q2 earnings of 66 cents per share. That beat the Street by two cents per share. The company said that bookings came in at $1.432 billion which was the high end of their range. Revenue rose 5% to $1.431 billion. That was in line with Cerner’s expectations.

“I am pleased with our financial results, which were in line with our expectations,” said Brent Shafer, Chairman and CEO, Cerner. “In addition to delivering solid quarterly operating results, we made good progress on the early stages of our transformation and positioning Cerner for long-term profitable growth. Cerner has played a key role in digitizing health care, and we believe our next era of growth will be driven by the tremendous opportunity related to helping our clients drive a higher order of benefits from this digitization.”

Now for guidance. For Q3, Cerner expects revenue between $1.405 billion and $1.455 billion and full-year revenue between $5.650 billion and $5.850 billion.

For Q3, Cerner expects earnings between 65 and 67 cents per share. That’s a tad light. Wall Street had been expecting 69 cents per share. Cerner sees full-year earnings between $2.64 and $2.72 per share. That’s the same as the previous guidance.

Overall, this is a good report. Earlier this year, Cerner reached an agreement with Starboard Value to start paying a dividend and increase its buyback authorization by $1.5 billion. Cerner remains a buy up to $76 per share.

Torchmark (TMK) is changing its name! On August 8, Torchmark will become Globe Life Inc. The new symbol will be GL. I’m generally not a fan of modern business names but this isn’t bad.

The company says that “the name change is part of a brand alignment strategy which will enhance the Company’s ability to build name recognition with potential customers and agent recruits through use of a single brand.”

For Q2, Torchmark reported earnings of $1.67 per share. That was two cents per share above the Street.

The details look pretty good. Net income as an ROE was 12.3%. Net operating income as an ROE excluding net unrealized gains on fixed maturities was 14.6%. For the year, Torchmark projects net operating income per share will be between $6.67 to $6.77. The current price is around 14 times that even though the stock just hit a new high. I’m lifting my Buy Below on Torchmark to $94 per share.

Thursday was a big day for us. We had five Buy List earnings reports.

Let’s start with Raytheon (RTN). Before the opening bell, the defense contractor reported very good results for their second quarter. For Q2, Raytheon earned $2.92 per share. That easily beat Wall Street’s consensus of $2.64 per share.

Raytheon also boosted its full-year guidance. The old guidance was for sales of $28.6 billion to $29.1 billion and earnings between $11.40 and $11.60 per share. The new guidance is for sales of $28.6 billion to $29.1 billion and earnings between $11.50 to $11.70 per share.

Raytheon will also be helped by the big defense spending bill recently passed by Congress. The shares jumped more than 4.5% on Thursday. I’m lifting my Buy Below on Raytheon to $195 per share. The company said the merger with United Technologies is expected to close in the first half of next year.

Hershey (HSY) had a very good quarter but guidance wasn’t that great. For Q2, the chocolate company earned $1.31 per share. That was an increase of 14.9% and it beat the Street by 14 cents per share. With that kind of earnings beat, you’d expect a big increase to guidance. Unfortunately, we didn’t get it.

On the plus side, I like that adjusted gross margin was 46.5% in Q2. That’s up from 44.5% in last year’s Q2. Organic constant currency net sales rose by 1.8%.

For this year, Hershey expects sales to rise by 2%. The previous guidance was 1% to 3%, so not much change here. Hershey also expects 2019 earnings of $5.68 to $5.74 per share. That’s an increase of five cents to the low end. This is after a 14-cent earnings beat.

On Thursday, Hershey opened sharply lower but the stock later regained its composure and rallied to a new high before the closing bell. I’m raising my Buy Below on Hershey to $155 per share.

AFLAC (AFL) said they made $1.14 per share for Q2, and forex knocked off a penny per share. The CEO said the duck stock aims to buy back $1.3 to $1.7 billion worth of stock this year.

AFLAC didn’t exactly raise guidance, but they said that earnings should come in at the higher end of their current range which is $4.10 to $4.30 per share. That’s based on an average exchange rate of 110.39 yen to the dollar. I’m raising my Buy Below to $57 per share.

Stryker (SYK) reported Q2 earnings of $1.98 per share which was four cents better than expectations. That’s up 12.5% from a year ago. Previously, the company had given us earnings guidance of $1.90 to $1.95 per share. For Q2, organic net sales rose by 8.5%, and operating margin expanded to 25.9%. That’s quite good.

I was also pleased to see Stryker raise its guidance for 2019. The company now expects full-year organic net sales to rise by 7.5% to 8.0%. The company expects earnings to range between $8.15 and $8.25 per share. The previous range was $8.05 to $8.20 per share.

This is a very strong stock. I’m lifting my Buy Below on Stryker to $223 per share.

Fiserv (FISV) reported Q2 earnings of 82 cents per share. That was a penny better than expectations.

This was a good quarter for Fiserv and that’s important because the CEO had said that Q2 will be the “low watermark” for earnings growth. They also said that the First Data acquisition will close on July 29. Fiserv also reiterated its full-year EPS range of $3.39 to $3.52.

I’m raising my Buy Below on Fiserv to $103 per share.

Six Earnings Reports Next Week

We have six more earnings reports next week. Three are on Wednesday, July 31 (CHD, MCO, CTSH) and another three are on Thursday, August 1 (BR, CBPX, ICE).

In April, Church & Dwight (CHD) released a pretty good earnings report. The consumer-products company beat estimates by four cents per share. I was pleased to see gross margins increase by 20 basis points to 45.1%. Operating margins rose 120 basis points to 23.1%.

CHD reiterated its full-year EPS guidance of $2.43 to $2.47. That’s an increase of 7% to 9% over last year. For Q2, CHD expects earnings of 52 cents per share.

Moody’s (MCO) also had a very good Q1 earnings report. In April, the credit-ratings agency reported earnings of $2.07 per share. That beat estimates by 14 cents per share.

Revenue at Moody’s Analytics rose 16%. The company stood by its full-year forecast of $7.85 to $8.10 per share. Moody’s continues to be our top-performing stock this year with a YTD gain of 43.4%. Wall Street expects Q2 earnings of $2.01 per share.

I’m very curious to hear what Cognizant Technology Solutions (CTSH) has to say for its Q2 earnings report. Their Q1 report was terrible. Wall Street was expecting $1.04 per share. Instead, CTSH earned 91 cents per share. The stock plunged 18% in two days.

Cognizant also cut its full-year forecast. Previously, the company expected EPS this year to be at least $4.40. Now they see it ranging between $3.87 and $3.95.

Where was the weakness? Apparently, the banking sector hasn’t been spending as much. The company’s Financial Services division, which makes up about one-third of its revenue, posted a sales decline of 1.7%. Karen McLoughlin, the company’s CFO, said, “Our revised full-year outlook reflects the first-quarter underperformance and expectations of slower growth in Financial Services and Healthcare for the remainder of 2019.”

Cognizant has gradually made back about half of what it lost in two days of trading. Wall Street expects 92 cents per share.

Broadridge Financial Solutions (BR) had a good report in May (their fiscal Q3) but the company issued mixed guidance. The company lowered its full-year revenue growth forecast from 3% – 5% down to about 1%.

BR reiterated its full-year EPS growth of 9% to 13%. Last year, the company made $4.19 per share, so the current outlook works out to $4.57 to $4.73 per share. Through the first three quarters, Broadridge earned $2.94 per share. That’s implies Q4 earnings of $1.63 to $1.79 per share.

The CEO said, “After a solid third quarter, Broadridge is very well-positioned to deliver strong full-year results.” BR is now a 40% winner for us this year. I’ll probably raise the Buy Below price, but I want to see the earnings numbers first.

Continental Building Products (CBPX) has been an unusual stock this year. The earnings reports have been quite good, but the stock hasn’t done much.

Three months ago, the wallboard company said it made 42 cents per share for Q1. That was eight cents more than expectations. Net sales rose 4.5% to $122 million, and wallboard volume increased by 5.5% to 649 million square feet. Continental’s Q1 profits were up 16.7% from a year ago. Operating income was up 11.3%.

For Q2, Wall Street expects earnings of 49 cents per share. They should be able to beat that.

Intercontinental Exchange (ICE) did well during Q1. The exchange operator made 92 cents per share. That was two cents more than Wall Street had been expecting. Their adjusted operating margin was 58%. Operating cash flow was up 14% from last year.

Shares of ICE got off to a slow start this year, but the stock has picked up steam since the spring. ICE made a new 52-week high last week. For Q2, Wall Street expects 92 cents per share.

Before I go, Smucker (SJM) raised its quarterly dividend from 85 to 88 cents per share. The new dividend will be paid on September 3 to shareholders of record on August 16. Based on Thursday’s close, SJM now yields 3.11%.

That’s all for now. There will be lots more reports next week. There’s also the big Fed meeting on Tuesday and Wednesday. The policy statement will come out on Wednesday at 2 pm. I think we’ll see a cut of 25 basis points, but I’m not positive. Then on Friday, we’ll get the July jobs report. The June report showed an increase of 224,000 net new jobs and the unemployment rate ticked up 3.7%. Be sure to keep checking the blog for daily updates. I’ll have more market analysis for you in the next issue of CWS Market Review!

– Eddy

Morning News: July 26, 2019
Posted by Eddy Elfenbein on July 26th, 2019 at 7:03 am

China Needs New Places to Sell Its Mountain of Stuff

New Auto Safety Technology Leaves Insurers in the Dark

Here’s Why Puerto Rico’s Next Governor Will Inherit a Financial Mess

T-Mobile Poised to Win U.S. Approval for Sprint Deal

Twitter Rises After Adding 5 Million Users, Beating Estimates

Chris Hughes Worked to Create Facebook. Now, He Is Working to Break It Up.

Spending a $108 Billion Checkbook Can Be Hard Work

In Roundup Case, U.S. Judge Cuts $2 Billion Verdict Against Bayer to $86 Million

Starbucks Boosts Sales With Help From New Drinks, Store Upgrades

Alphabet Earnings: Profits Triple and Slump Worries Ease

Apple Confirms $1 Billion Deal for Intel’s Smartphone-Modem Business

Tesla Tech Chief’s Exit Is Latest High-Profile Departure

Roger Nusbaum: Selling Without Selling

Ben Carlson: Animal Spirits: Broke & Overweight & $10,000

Nick Maggiulli: How Do You Plan For This?

Be sure to follow me on Twitter.

Earnings After the Bell
Posted by Eddy Elfenbein on July 25th, 2019 at 4:11 pm

After the bell, Fiserv (FISV) reported earnings of 82 cents per share. That was a penny better than expectations.

“We delivered stronger than expected second quarter results across all financial measures including double-digit sales growth,” said Jeffery Yabuki, President and Chief Executive Officer of Fiserv. “At the same time, we continue to advance our integration planning efforts for our pending First Data acquisition which we expect to close on July 29.”

For 2019, Fiserv expects EPS to range between $3.39 and $3.52. That’s growth of 10% to 14%. Fiserv’s CEO has said that Q2 will be the “low watermark” for earnings growth.

Stryker (SYK) reported Q2 earnings of $1.98 per share which was four cents better than expectations. That’s up 12.5% from a year ago. Previously, the company had given us earnings guidance of $1.90 to $1.95 per share. For Q2, organic net sales rose by 8.5%, and operating margin expanded to 25.9%. That’s quite good.

I was also pleased to see Stryker raise its guidance for 2019. The company now expects full-year organic net sales to rise by 7.5% to 8.0%. The company expects earnings to range between $8.15 and $8.25 per share. The previous range was $8.05 to $8.20 per share.

AFLAC (AFL) said it made $1.14 per share for Q2. Forex knocked off one penny per share.

The CEO commented:

“We remain committed to maintaining strong capital ratios on behalf of our policyholders and balancing our financial strength with reinvesting in our business, increasing the dividend, and repurchasing shares. Our dividend track record is supported by the strength of our capital and cash flows. We continue to anticipate that we’ll repurchase in the range of $1.3 to $1.7 billion of our shares in 2019, with the range allowing us to be more tactical in our deployment strategy. As is always the case, this assumes stable capital conditions and the absence of compelling alternatives. At the same time, we recognize that prudent investment in our platform is critical to our growth strategy and driving efficiencies that will impact the bottom line for the long term.

“I want to reiterate our 2019 earnings guidance. Our consistent, solid results in the first half of the year benefited from timing of expenses and a modestly favorable effective tax rate in the period, which puts us on track to produce adjusted earnings per diluted share toward the higher end of the range of $4.10 to $4.30, assuming the 2018 weighted-average exchange rate of 110.39 yen to the dollar. As always, we are working very hard to achieve our earnings-per-share objective while also ensuring we deliver on our promise to policyholders.”

Earnings from Raytheon and Hershey
Posted by Eddy Elfenbein on July 25th, 2019 at 10:27 am

This is a big day for earnings. We had two Buy List reports this morning, and three more are due later today.

Let’s start with Raytheon (RTN). The defense contractor had a very good second quarter. For Q2, Raytheon earned $2.92 per share. That easily beat Wall Street’s consensus of $2.64 per share.

“The company had very strong second quarter operating results, with our bookings, sales, operating margin, EPS, and cash flow all exceeding our expectations,” said Thomas A. Kennedy, Raytheon Chairman and CEO. “We begin the second half with continued confidence in our growth outlook given our innovative technologies, breadth of franchises, and record backlog.

“Integration planning for the merger with United Technologies is progressing well, with the integration team developing detailed execution plans to capture revenue and cost synergies rapidly and ensure seamless operations post close. We continue to expect the transaction to close in the first half of 2020.”

Raytheon also boosted its full-year guidance. Their sales guidance rises from $28.6 billion – $29.1 billion to $28.8 billion – $29.3 billion. The earnings range increases from $11.40 – $11.60 per share to $11.50 – $11.70 per share.

Raytheon will also be helped by the big defense spending bill recently passed by Congress.

Hershey (HSY) had a very good quarter but guidance wasn’t that great. For Q2, the chocolate company earned $1.31 per share. That beat the Street by 14 cents per share. So with that kind of earnings beat, you’d expect a big increase to guidance. Well, we didn’t get it.

On the plus side, I like that adjusted gross margin was 46.5% in Q2. That’s up from 44.5% in last year’s Q2.

Here are some numbers for Q2:

• Consolidated net sales of $1,767.2 million, an increase of 0.9%.
• Organic constant currency net sales increased 1.8%.
• The net impact of acquisitions and divestitures was a 0.6 point headwind, and foreign currency exchange was a 0.3 point headwind.
• Reported net income of $312.8 million, or $1.48 per share-diluted, an increase of 37%.
• Adjusted earnings per share-diluted of $1.31, an increase of 14.9%.

And here’s a look at what to expect this year:

• Full-year reported net sales are expected to increase around 2%, the mid-point of the previous 1-3% range.

• The net impact of acquisitions and divestitures is estimated to be approximately a 0.5 point benefit.

• The impact of foreign currency exchange is anticipated to be negligible based on current exchange rates.
• Full-year reported earnings per share-diluted are expected to be in the $5.54 to $5.66 range, relatively flat with prior year.
• Full-year adjusted earnings per share-diluted are expected to increase 6% to 7%, the upper half of the previous 5% to 7% range.

For adjusted EPS, the key number, Hershey now expects earnings of $5.68 to $5.74 per share. That’s an increase of five cents to the low. This is after a 14-cent earnings beat.

Morning News: July 25, 2019
Posted by Eddy Elfenbein on July 25th, 2019 at 7:23 am

Strange Economics of Mideast Oil Shield Trump From Iran’s Bite

U.S. Economic Growth Seen Stumbling as Trade Weighs on Business

The Logic Behind the Bonds that Eat Your Money

Facebook Antitrust Inquiry Shows Big Tech’s Freewheeling Era Is Past

Ad Tool Facebook Built to Fight Disinformation Doesn’t Work as Advertised

Nissan to Cut 12,500 Jobs as It Struggles After Ghosn’s Arrest

Tesla Breaks Records But Doesn’t Break Even

The Little Hybrid That Could, and Still Can

DoorDash Changes Tipping Model After Uproar From Customers

What’s Meat Got to Do With It?

Comcast Second-Quarter Profit Beats Wall Street, Misses on Revenue

Warren Buffett Charity Lunch in Limbo After Crypto Promoter Issues Apology

Lawrence Hamtil: Is Risk A Function of Sector or Size? Part II

Cullen Roche: Congrats on Your Debt Ceiling Increase

Jeff Carter: Expounding on Product Market FitBe sure to follow me on Twitter.

Earnings from Cerner and Torchmark
Posted by Eddy Elfenbein on July 24th, 2019 at 4:16 pm

After the close, Cerner (CERN) announced Q2 earnings of 66 cents per share. That beat the Street by two cents per share. The company said that bookings came in at $1.432 billion which was the high end of their range. Revenue rose 5% to $1.431 billion. That was in line with Cerner’s expectations.

“I am pleased with our financial results, which were in line with our expectations,” said Brent Shafer, Chairman and CEO, Cerner. “In addition to delivering solid quarterly operating results, we made good progress on the early stages of our transformation and positioning Cerner for long-term profitable growth. Cerner has played a key role in digitizing health care, and we believe our next era of growth will be driven by the tremendous opportunity related to helping our clients drive a higher order of benefits from this digitization.”

Now for guidance. For Q3, Cerner expects revenue between $1.405 billion and $1.455 billion, and full-year revenue between $5.650 billion and $5.850 billion.

For Q2, Cerner expects earnings between 65 and 67 cents per share. Wall Street had been expecting 69 cents per share. Cerner sees full-year earnings between $2.64 and $2.72 per share. That’s the same as the previous guidance. The Street was at $2.67 per share.

Regarding Torchmark (TMK), first, the big news: the company is changing its name to Globe Life Inc. effective August 8, 2019. The new symbol will be GL.

The name change is part of a brand alignment strategy which will enhance the Company’s ability to build name recognition with potential customers and agent recruits through use of a single brand. The underwriting companies owned by the Parent Company will continue to exist as legal entities, but over a period of time will go to market under the Globe Life name to leverage branding initiatives implemented at Globe Life And Accident Insurance Company in recent years.

For Q2, Torchmark reported earnings of $1.67 per share. That was two cents per share above the Street.

Here are some highlights from the quarter:

Net income as an ROE was 12.3%. Net operating income as an ROE excluding net unrealized gains on fixed maturities was 14.6%.

Life underwriting margin at American Income Exclusive Agency and Globe Life Direct Response both increased over the year-ago quarter by 9%.

Health underwriting margin at Family Heritage Exclusive Agency increased over the year-ago quarter by 14%.

Life premiums increased over the year-ago quarter by 7% at American Income Exclusive Agency and health premiums increased over the year-ago quarter by 8% at Family Heritage Exclusive Agency.

Net health sales increased over the year-ago quarter by 14%.

979,215 shares of common stock were repurchased during the quarter.

For the year, Torchmark projects net operating income per share will be between $6.67 to $6.77.

Check Point Beats by a Penny
Posted by Eddy Elfenbein on July 24th, 2019 at 10:33 am

We have three earnings reports today. Cerner (CERN) and Torchmark (TMK) report after the close, but Check Point Software (CHKP) reported this morning. For Q2, the cyber-security firm earned $1.38 per share. That beat Wall Street’s consensus by one penny per share. Revenues rose 4% to $488 million which matched expectations.

“Second quarter results were driven by 13 percent growth in our security subscriptions revenues, which included our advanced threat prevention and our CloudGuard family of products,” said Gil Shwed, Founder and CEO of Check Point Software Technologies. “We continued to expand our product offerings during the second quarter with the introduction of new technologies which included Malware DNA, a new artificial intelligence-based engine that accelerates zero-day threat prevention, and CloudGuard Log.ic, providing threat protection and context-rich security intelligence.”

Now for guidance. For Q3, Check Point sees EPS ranging between $1.36 and $1.44 on revenue of $480 to $500 million. For the entire year, CHKP projected earnings between $5.85 and $6.25 per share, and revenue between $1.94 and $2.04 billion.

Morning News: July 24, 2019
Posted by Eddy Elfenbein on July 24th, 2019 at 7:18 am

The Old Rules for Building Wealth Are Obsolete

Justice Department to Open Broad, New Antitrust Review of Big Tech Companies

‘We’re Full,’ Car Dealers Say as Auto Sales Slow After a Long Boom

Nissan to Report 90% Plunge in Profit & Nissan to Cut Over 10,000 Jobs Globally

More Proof That Ford Will Eat Tesla’s Lunch in the Next Two Years

Deutsche Bank Sinks to $3.5 Billion Loss as Overhaul Costs Hurt

Coca-Cola Hits All-Time High as New Products Shine

Visa Reports Earnings Results Above Expectations

Snap Back?

Amazon Is Teaming Up With a Real Estate Broker. How Scared Should Zillow Be?

Dish Agrees to $5 Billion Deal for Wireless Assets

Equifax’s $700 Million Settlement: How to Get Your Share

Nick Maggiulli: Eating Your Own Cooking

Michael Batnick: Auto-Correct

Ben Carlson: You May Have Longer Than You Think to Invest For Retirement

Be sure to follow me on Twitter.

Smucker Raises Dividend
Posted by Eddy Elfenbein on July 23rd, 2019 at 6:46 pm

Press release:

The J. M. Smucker Company (SJM) today announced that the Board of Directors has approved an increase in the quarterly dividend from $0.85 to $0.88 per common share, an increase of four percent. The dividend will be paid on Tuesday, September 3, 2019, to shareholders of record at the close of business on Friday, August 16, 2019. This represents the Company’s eighteenth consecutive year of dividend growth.

Sherwin-Williams Rises on Good Earnings
Posted by Eddy Elfenbein on July 23rd, 2019 at 11:00 am

Shares of Sherwin-Williams (SHW) are up nicely this morning. The company reported Q2 earnings of $6.57 per share. That was 20 cents higher than expectations.

For the quarter, consolidated net sales rose 2.2% to $4.88 billion. Net sales in stores open more than a year rose by 4.3%. Sherwin stood by its full-year EPS guidance of $20.40 to $21.40 per share.

Commenting on the second quarter, John G. Morikis, Chairman and Chief Executive Officer, said, “Sherwin-Williams delivered record results in net sales, EBITDA, profit before taxes and net operating cash in the second quarter, overcoming uneven demand in end markets outside the U.S. and persistently challenging selling conditions in North American architectural paint markets. Gallon growth in our North American paint stores and continued progress on our pricing initiatives in all segments combined to drive consolidated adjusted gross margin to 44.9% and support our continued investments in solutions for our customers. We also continued to effectively manage costs, which combined with the gross margin improvement, drove a 15% year-over-year increase in adjusted earnings per share. We expect gross margins to continue to improve in the second half of the year, driven by continued volume growth and lower projected year-over-year raw material pricing.

“All three of our segments increased profit and margin year-over-year. In The Americas Group, we generated sales growth in all end markets in our North American paint stores, led by high single digit growth in residential repaint. We leveraged the sales growth to expand segment margin by 50 basis points to 22.2%. We’ve opened 20 net new stores year to date, and our professional painting contractor customers continue to report solid backlogs and project pipelines going forward. In our Consumer Brands Group, our growth initiatives with our largest partners in North America are performing well and more than offset softer demand in some international markets. Adjusted segment margin improved 490 basis points to 20.3%, driven by sales growth and good cost control. Performance Coatings Group sales declined in the quarter mainly related to softer demand in some end markets in Asia and Europe. Despite the sales decline, adjusted segment margin increased 150 basis points to 15.5% – evidence of our good cost control and that our recent pricing actions are gaining traction to offset raw material inflation.

“For the third quarter, we anticipate our consolidated net sales will increase by a low single digit percentage compared to last year’s third quarter. For the full year 2019, we expect our consolidated net sales will increase two to four percent compared to the full year 2018. We are updating our full year 2019 diluted net income per share guidance to be in the range of $16.14 to $17.14 per share as a result of the $.79 per share charge related to the tax credit investment loss. Diluted net income per share in 2018 was $11.67 per share, including a charge of $4.15 per share for acquisition-related costs and charges for non-operating expenses of $2.71 per share. We are reaffirming our full year 2019 adjusted diluted net income per share guidance to be in the range of $20.40 to $21.40 per share, excluding acquisition-related costs and charges for non-operating expenses, compared to $18.53 per share for the full year 2018 on a comparable basis.”