Sherwin-Williams' CEO Says Its "Magic Number" Is Coming. Are Shares a Buy?

In 1991, the paint-making institution Sherwin-Williams (NYSE: SHW) was celebrating much than its 125th birthday. That year, profits climbed to $63 cardinal connected income of $1.37 billion, securing Sherwin-Williams' spot arsenic 1 of the precise fewer companies to predominate its manufacture for a century. Since then, profits person risen to $3.34 cardinal crossed each segments, a 5,200% rise. Capital appreciation people followed; since 1991, shares person returned 13,470%.

Over the past fewer decades, Sherwin-Williams has been 1 of the precise champion stocks connected Wall Street to own. Yet its caller returns person been disappointing, with shares astir precisely level implicit the past 12 months adjacent arsenic the S&P 500 returned 14%. The lag comes amid what CEO Heidi Petz acknowledged arsenic a "very challenging environment" that she expected would persist astatine slightest passim the archetypal fractional of 2026.

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This was six months ago, however. In the aforesaid net call, Petz besides pointed to a "magic number" approaching that could bring backmost the company's momentum. Sure enough, shares person rallied 12% successful 2026 truthful far, perchance successful anticipation of this. While galore companies cheer falling involvement rates, there's 1 related fig that Sherwin-Williams and each construction-involved institution is much funny in: the 30-year fixed owe rate.

Since the Federal Reserve began ramping up involvement rates successful mid-2022 to combat inflation, the 30-year fixed owe rate, oregon the astir communal owe indebtedness enactment for U.S. homeowners, has risen from a pandemic-era debased of 2.67% successful December 2020 to arsenic precocious arsenic 7.79% successful October 2023.

This was the highest level seen since precocious 2000, and caused lodging operation to autumn contempt a proviso shortage, arsenic imaginable caller homeowners balked astatine the overmuch higher monthly payments. This slowdown is simply a large woody for Sherwin-Williams since its North American architectural overgarment segment, known arsenic Sherwin's Paint Stores Group, is its biggest and astir profitable segment, accounting for astir two-thirds of profits successful 2023.

But arsenic you tin spot below, the 30-year fixed owe complaint has tumbled successful caller months, and is tantalizingly adjacent to the 6% level that Petz called the magic fig for unleashing pent-up operation demand.

The autumn comes amid 3 involvement complaint cuts from the Federal Reserve successful 2025, with much expected by April oregon June. In May, President Donald Trump's nominee to seat the cardinal bank, Kevin Warsh, is expected to beryllium sworn in, and the apt caller Fed Chair has signaled helium volition advocator for much chopped rates. Traders are forecasting a 74% likelihood that the Fed cuts rates successful June, perchance by a melodramatic 75 ground points, which brings rates to the 2.75% to 3% range.