At first glance, things look bleak for Sherwin-Williams (NYSE: SHW), the world’s largest paint and coating company by revenue.
Housing demand has been weak over the past five years, hurting sales for the 160-year-old American icon. In addition to its namesake brand, Sherwin-Williams sells Dutch Boy, Thompson’s Water Seal and Valspar paints.
The weak demand for architectural paint, which goes on residential and non-industrial commercial buildings, has done a number on Sherwin-Williams stock. It has generated an annualized total return of only 4% over the past five years and a negative return of 8% over the last 12 months.
But the company has strong fundamentals. It makes quality paint that consumers, especially professional painters, are willing to pay up for. “We think Sherwin-Williams benefits from durable competitive advantages that should support economic profits for at least the next 20 years,” Morningstar analyst Nicolas Owens wrote in a commentary.
Sherwin has three divisions:
The paint store group, which has more than 5,000 locations in North and South America. It accounts for 58% of Sherwin’s revenue.
The consumer brands group, which includes Sherwin brands sold at Lowe’s, Walmart and other retailers. It makes up 13% of sales.
The performance coatings group, which provides everything from marine paints to airplane coatings. It represents 29% of revenue.
Stellar paint palette
It all starts with the product. “Sherwin-Williams paint is well known in the industry for having desirable characteristics, including coverage (fewer coats needed), durability (lasts longer), cure time (less waiting time), and ease of application,” Owens said.
About 90% of the paint store group’s revenue comes from professional painters. They do the bulk of exterior paint jobs because of the size and complexity of the work.
“These professional painters are willing to pay more for quality paints that make their jobs easier,” Owens said. “This dynamic provides strong pricing power for Sherwin…. While there are competitors that produce quality paints at similar or lower prices, Sherwin can leverage its trusted brand and convenient retail network to retain and add professional painters” as customers.
Sherwin’s retail stores are an important part of the puzzle. “They make purchasing supplies for professional painters convenient and consistent,” Owens said. “The company’s vast retail footprint means that professional painters are never far from a store where they can purchase the same Sherwin products they have relied on for years.”
Coatings group lags
As for the coatings group, it has less pricing power than Sherwin’s other segments because of heated competition in the global coatings market, Owens said. Still, the company benefits from the fact that it custom develops some of its industrial coatings and coatings for clients.
Looking at Sherwin’s earnings, they were pretty good in the first quarter. Revenue rose 6.8%, though much of that gain stemmed from an acquisition and currency movement. Price increases also helped. Profit gained 6.1%.
However, the company is cautious about the rest of 2026. “We continue to expect little to no recovery in most end markets this year, given current customer sentiment and the leading indicators we monitor.,” the company said in its latest commentary.
“Geopolitical events are adding further demand uncertainty, along with potential inflation related to raw materials, energy, logistics and packaging.”
So Sherwin hopes that short-term pain will turn to long-term gain, that it will create a glossy shine for itself.
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