Goldman Sachs lowers Sherwin-Williams stock price target on valuation

Goldman Sachs has reduced its price target for Sherwin-Williams stock (NYSE:SHW) to $410 from $420, while keeping a Buy rating. Analyst Duffy Fischer made this adjustment based on a 29.8x multiple applied to Sherwin-Williams' 2027 earnings per share estimate, down from a 30x multiple previously. This change reflects slightly lower multiples for peers in the industry.

Currently, the stock trades at a P/E ratio of 29.58, which is higher than company earnings growth suggests, resulting in a PEG ratio of 3.81. Analysts note that Sherwin-Williams' stock price has historically ranged between 17x and 31x over the past six years. Risks associated with the company include exposure to U.S. construction markets like remodeling, maintenance, and new homes, potential lead paint liability, and fluctuations in raw material costs.

Goldman Sachs' assessment indicates that the stock is overvalued compared to its Fair Value estimate. The consensus target range for the stock among analysts stands between $340 and $420, positioning Goldman's $410 target at the higher end of this range. Sherwin-Williams has been under scrutiny from several analysts recently. BMO Capital reiterated an Outperform rating with a $405 price target following their visit to the company's investor day and new headquarters.

Mizuho also maintained its Outperform rating with a $396 price target after engaging with Sherwin-Williams' leadership during the same event. Wells Fargo kept its Equal Weight rating with a $360 price target, maintaining its previous stance. RPM International recently revealed its first-quarter earnings, with EBITDA of $405 million, slightly below the $410 million estimate by RBC Capital.

However, earnings per share were higher than expected, at $1.98 compared to RBC's estimate of $1.95. Despite challenges such as raw material inflation, RBC Capital kept its Outperform rating on RPM International.