JP Morgan downgrades Sherwin-Williams rating

28 October 2008 15:25  [Source: ICIS news]

TORONTO (ICIS news)--JP Morgan has downgraded its rating and cut its target price for the shares of Sherwin-Williams as the US paint producer was exposed to weak domestic residential and commercial construction markets, it said on Tuesday.

“Sherwin has its work cut out in 2009 given the weakness in the domestic residential and commercial construction markets, which may mitigate benefits from price increases, cost reductions, and lower advertising expenses,” the analysts said.

 

US housing starts decreased 39% year-to-date and existing home sales - a good indicator for volumes related to repaint markets - decreased 36% over the same period, they said.

 

JP Morgan lowered its rating for Sherwin-Williams from “overweight” to “neutral” and cut its target price for the shares to $50 from $65.

 

The shares were down 2.8% at $49.96 in Tuesday morning trading on the New York Stock Exchange.

 

However, Sherwin’s longer-term investment fundamentals were good, the analysts said.

 

The company had a strong balance sheet and management had a good track record of reducing costs in the wake of soft end market demand.

 

Also, Sherwin was increasing market share by virtue of its captive distribution network, and was maintaining a healthy, though lower level of margin, JP Morgan said.

 

($1 = €0.80)

 

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By: Stefan Baumgarten
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