UBS Downgrades Sherwin-Williams, Cuts Price Target by $55 to $330
SHW•UBS cut Sherwin-Williams to Neutral and lowered its 12-month price target to $330 from $385, citing a housing downturn delaying earnings recovery until 2028. The bank forecasts 5% EPS growth over two years and warns a potential AkzoNobel bid could lift leverage above 3x EBITDA, risking a 10% derating.
1. UBS Downgrades and Price Target Revision
UBS downgraded Sherwin-Williams from Buy to Neutral and lowered its 12-month price target to $330 from $385. The bank forecasts only 5% EPS growth over the next two years, reflecting a delayed earnings recovery until at least 2028.
2. U.S. Housing Market Pressure
Sherwin-Williams’s Paint Stores Group, which generates around 70% of earnings, is under strain from elevated mortgage rates, persistent inflation and poor housing affordability. UBS expects subpar home sales and repaint demand to persist, postponing a market turnaround until 2028 or later.
3. AkzoNobel Bid Raises Leverage Concerns
Sherwin-Williams’s joint bid for parts of AkzoNobel could unlock 7–10% EPS synergies but might boost debt-to-EBITDA above 3x. UBS warns increased leverage and a shift toward lower-growth industrial coatings could trigger a roughly 10% valuation derating.
4. Long-Term Growth Outlook
Despite near-term headwinds, UBS remains constructive on Sherwin-Williams’s long-term prospects, forecasting double-digit annual earnings growth from 2028 onward based on market share gains, pricing power and easing raw-material costs.
