Sherwin-Williams (SHW) remains well-positioned to benefit from a recovery in the US housing market, but "unsupportive" market conditions are delaying that timeline, UBS said in a note emailed Tuesday.
The analysts said they now forecast the company's earnings to grow at roughly a 5% compound annual rate over the next two years and do not expect above-average growth until 2028 or later.
Sherwin-Williams' "stock deserves a premium [versus] coatings peers due to pricing power, but mix shift and higher leverage from potential [mergers and acquisitions] could become an overhang and risks a derating near-term," the analysts added.
The analysts said their adjusted earnings per share estimates are 5% below consensus for 2027 and roughly in line for 2028. Given the muted growth outlook and lack of a clear catalyst, they believe the stock is unlikely to see a meaningful re-rating in the medium term and now view the risk-reward profile as more balanced.
UBS downgraded Sherwin-Williams from buy to neutral and lowered its price target to $330 from $385.
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