Sherwin-Williams Navigates 'Softer for Longer' Market to Post Strong Q4, Eyes Modest 2026 Growth
CLEVELAND – Sherwin-Williams (NYSE: SHW) closed its fiscal year on a resilient note, delivering a stronger-than-anticipated fourth quarter even as management cautioned that the tepid demand plaguing the coatings industry is set to extend well into 2026. In its earnings call Tuesday, the company outlined a path of measured growth, banking on market share gains and operational efficiency rather than a broad-based market recovery.
Consolidated sales for the quarter rose by a mid-single-digit percentage, bolstered by the recent acquisition of Brazil's Suvinil. Adjusted earnings per share climbed 6.7%, while adjusted EBITDA margin expanded to 17.7% of sales—a 100-basis-point improvement that underscored tight cost control. Free cash flow conversion remained robust at 90.1%.
"Our teams executed exceptionally in a market that provided no meaningful tailwind," said Chair, President, and CEO Heidi Petz. "We focused on what we could control: winning share, managing costs, and investing in our strategic priorities." Petz highlighted the company's move into its new global headquarters and technology center as a milestone for future innovation.
Segment performance was mixed. The flagship Paint Stores Group saw sales growth within expectations, with a standout performance in Protective & Marine coatings. The Consumer Brands Group, aided by Suvinil, exceeded forecasts, though underlying sales were essentially flat. The Performance Coatings Group, driven by packaging and auto refinish, hit the high end of expectations with a notable 150-basis-point margin improvement.
In a move signaling confidence in its financial footing, Sherwin-Williams announced it will reinstate its 401(k) match for U.S. employees starting February 1, restoring contributions paused last October. Petz framed the earlier suspension as a measure to "protect jobs" amid uncertainty.
Looking ahead, the guidance for 2026 reflects a cautious stance. The company projects consolidated sales to grow in the low-to-mid single digits, with adjusted EPS expected between $11.50 and $11.90. This midpoint would represent a modest 2.4% increase over 2025's adjusted results. Management cited persistent softness in residential construction, muted consumer sentiment, and weak industrial indicators as continuing challenges.
"The environment entering 2026 feels much like it did a year ago—'softer for longer' remains the operative phrase," Petz told analysts, acknowledging the company's forecasts are conservative by design.
Market Voices: Analysts and Observers Weigh In
Michael R. Chen, Portfolio Manager at Horizon Capital: "Sherwin's ability to expand margins in this environment is textbook operational excellence. The reinstatement of the 401(k) match is a positive signal about their cash flow stability and a prudent morale booster. They're navigating the downturn admirably."
David P. Finley, Independent Retail Analyst: "The 'softer for longer' commentary is the big takeaway. It confirms what we're seeing across housing and industrial data. Sherwin's guidance feels realistic, maybe even slightly conservative, which gives them room to outperform if the macro picture brightens even slightly in the second half."
Sarah J. Mendelson, Editor at 'The Ethical Investor' Blog: "Let's be clear: pausing employee retirement benefits to 'protect jobs' is corporate spin at its finest. They saved $40 million last year through 'cost actions'—was squeezing worker retirement plans really necessary for a company posting record sales? This reinstatement feels less like generosity and more like damage control after a questionable decision."
Robert L. Gupta, Senior Analyst at Midtown Research: "The margin story in Performance Coatings is impressive and speaks to successful pricing power and SG&A discipline. The Suvinil integration appears on track, providing a needed growth lever in a flat market. The 2026 outlook is pragmatic, not exciting, which is exactly what investors should expect in this climate."