SHW Brushes Off Sunny Sales Guidance

A key trendline is keeping the equity's rally in check

Deputy Editor
Jun 22, 2020 at 10:27 AM
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The shares of Sherwin-Williams Co (NYSE:SHW) pivoted lower this morning, down 1.1% at $577.96, even after the paint producer increased its second-quarter sales guidance. Additionally, Sherwin-Williams' net sales in its consumer brands group are expected to be well above the high end of its previous guidance. The company chalked both announcements up to an increase in consumers' house projects and ability to quickly adapt during the COVID-19 pandemic. 

On the charts, SHW has been consolidating just below its early June record peak near the $600 region. This level also acted as a ceiling for SHW back in early 2020, prior to its March plummet, and coincides with the equity's year-to-date breakeven level, where it's trading just south of today. The stock has clearly recovered, though, up an impressive 45.5% in the last three months. 

As a result, short sellers are hitting the exits at an alarming rate, down 38.7% in the last reporting period, while the 270,000 shares sold short now make up less than 1% of the stock's available float.

Analysts, meanwhile are still a bit scattered regarding their positions. Of the 18 in coverage, nine sport a "buy" or better. Conversely, eight rate it a tepid "hold," while one calls it a "sell." Meanwhile, the security's 12-month consensus price target of $585.90 is an incredibly thin 1.4% premium to current levels. 

It's also worth noting that SHW options can be had for a bargain right now. Sherwin-Williams stock’s Schaeffer’s Volatility Index (SVI) of 30% sits in the 14th percentile of all other readings from the past year, meaning options players are pricing in relatively low volatility expectations at the moment.


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