Investing.com -- Shares of Sherwin-Williams Co (NYSE:SHW) rose around 1% at $365 before the opening bell after Berenberg upgraded paint manufacturer to "Buy" from "Hold" on accelerating earnings and free cash flow growth fuelled by structural changes in the U.S. decorative paints market.
Brokerage also raised its price target on the stock to $420 given a more optimistic outlook on market share gains and a recovering housing sector.
Sherwin-Williams is poised to benefit from the exit of smaller competitor Kelly-Moore and PPG’s divestment of its U.S. and Canadian architectural paint businesses. Berenberg expects the company to leverage its dominant 50% market share and expansive store network to capture displaced customers, particularly in high-growth regions like California and Texas.
The easing competitive landscape allows Sherwin-Williams to implement price increases and streamline its product offerings, supporting gross margin expansion. While higher SG&A costs are anticipated as the company invests in sales personnel, Berenberg views these efforts as crucial for seizing emerging market opportunities.
Sherwin-Williams’ valuation, though elevated, is seen as justified given the expected acceleration in earnings and cash flow as capital expenditures taper off by 2025.
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