Chicago, IL, July 22--Sherwin-Williams Co., the No. 1 U.S. paint maker, on Tuesday said second-quarter net earnings rose only 2.4 percent as wet spring weather in certain regions dampened sales.
The company, whose brands include Dutch Boy and Krylon Paints, also cut its annual sales forecast.
Sherwin-Williams has benefited from torrid new home sales, which have boosted demand for paint, but its other businesses such as industrial coatings have suffered in a sluggish economy.
"What the company needs is growth in the industrial and manufacturing markets," said Charles Cerankosky, analyst at McDonald Investments.
Sherwin-Williams reported net income of $110.1 million, or 75 cents a share, compared with $107.5 million, or 70 cents a share, in the year-ago period.
Analysts on average had expected 75 cents a share, according to research firm Thomson First Call.
Sales at Sherwin-Williams rose 1.3 percent to $1.47 billion in the second quarter.
Despite the cut in sales outlook, Sherwin-Williams stock closed at $28.06, up $1.10, or more than 4 percent, Tuesday afternoon on the New York Stock Exchange.
The stock rose sharply after the company mentioned in a conference call Tuesday that two lead paint lawsuits were dismissed.
The lawsuits were filed by people whose children have suffered from lead poisoning, or by adults who still suffer the effects of exposure to lead as children.
The Cleveland-based company stopped using lead paint in the 1930s, but continues to face related lawsuits, Cerankosky said.
Sales at its paint stores rose 2.4 percent, although unusually wet spring weather hurt demand in the mid-Atlantic. Operating profit slipped 0.8 percent.
Further recovery from the adverse effects of the weather will not be likely, according to Chief Executive Christopher Connor.
"Painters are now working from sun-up to sundown every day, and they are not going to get any additional hours in the day. So there will be no catching up for us," he said on a conference call with analysts.
In the consumer segment, which includes sales to other retailers, sales fell 1.4 percent while operating profit was flat. Bad weather was also a factor in that segment.
In the automotive finishes segment, net sales dipped 1.9 percent, while operating profit fell almost 14 percent, but the company said it sees signs of improvement.
Internationally, sales rose 5.2 percent, largely because of strength in Britain. Operating profit fell, however, because of pricing pressure in Brazil.
The company cut its annual sales forecast to a 1.5 to 3 percent increase from last year, from the previous forecast of a 2 to 3.5 percent climb.
But it said cost cuts would allow it to maintain its full-year earnings forecast of $2.08 to $2.24 per share.
The company is beginning to see signs of recovery in the industrial sector, according to Connor. "We are seeing a slow pick-up in marine coatings as ships start to return to the U.S. from the middle East," he said.
For the third quarter, the company said it expects profit of 75 cents to 80 cents a share with a low single-digit increase in sales.
Analysts on average forecast profit of 79 cents a share in the third quarter and $2.17 for the year, according to Reuters Research.
