tapebrief
SHW · Q1 2025
Preliminary brief— based on press release only. Full analysis including management tone and Q&A will be added when the transcript is available.

SHW · Q2 2025 Earnings

Sherwin-Williams

Reported July 28, 2026

30-second summary

Sherwin-Williams delivered Q2 revenue of $6.79B (+7.5% YoY), above consensus of $6.60B (+2.9% surprise) and above the "mid-single digit %" guide set last quarter, with adjusted EPS of $3.70 beating consensus of $3.52 by 5.1%. Management raised FY2026 adjusted EPS to $11.80–$12.20 (+$0.30 at both ends), raised GAAP EPS to $10.92–$11.32 (+$0.22 at both ends), and shifted the FY revenue growth guide from "low to mid" to "mid to high" single digit. The tension: the raise arrives alongside press-release language still calling out "continued demand softness in the second half," meaning the raise is being funded by pricing and operational leverage rather than a demand inflection — and notably, Q2 gross margin came in at 49.2%, down 20bps YoY, marking the first YoY gross margin contraction in several quarters.

Headline numbers

EPS

Q2 FY2025

$3.70

+5.1% vs est.

Revenue

Q2 FY2025

$6.79B

+7.5% YoY

+2.9% vs est.

Gross margin

Q2 FY2025

49.2%

Free cash flow

Q2 FY2025

$1.24B

Operating margin

Q2 FY2025

16.4%

Key financials

Q2 FY2025
MetricQ2 FY2025Q2 FY2024YoYQ1 FY2025QoQ
Revenue$6.79B$6.31B+7.5%$5.67B+19.7%
EPS$3.70$3.38+9.5%$2.35+57.4%
Gross margin49.2%49.4%-20bps49.1%+10bps
Operating margin16.4%15.6%+80bps12.0%+440bps
Free cash flow$1.24B————

Guidance

Company raised full-year FY2026 EPS guidance (both GAAP and adjusted) and revenue growth expectations (to mid-to-high single digit) following Q2 beat on revenue and strong operational execution.

Guidance is issued for the full year only, refreshed each quarter. Prior and new below are the same FY updated this quarter.

Actuals vs prior guidance

MetricPeriodPrior guideActualΔResult
RevenueQ2 FY2025mid-single digit % YoY7.5% YoY+above guide (mid-single digit typically 4-6%)Beat

New guidance

MetricPeriodGuideYoY
Revenue YoY growthQ3 FY2026mid to high-single digit %—

Changes to prior guidance

MetricPeriodPrior guideNew guideΔResult
Diluted net income per share
FY2026
$10.70 to $11.10$10.92 to $11.32+$0.22 to +$0.32 (low end +3.1%, high end +2.9%)Raised
Adjusted diluted net income per share
FY2026
$11.50 to $11.90$11.80 to $12.20+$0.30 to +$0.30 (low end +2.6%, high end +2.5%)Raised
Revenue YoY growth
FY2026
low to mid-single digit %mid to high-single digit %upside shift from 'low to mid' to 'mid to high' single digitRaised

Reaffirmed unchanged this quarter: Effective tax rate (Low twenty percent)

Segment KPIs

Q2 FY2025
SegmentQ2 FY2025Q2 FY2024YoY
Paint Stores Group$3.89B$3.702B+5.1%
Consumer Brands Group$0.984B$0.809B+21.5%
Performance Coatings Group$1.914B$1.801B+6.3%

Other KPIs

Q2 FY2025
SegmentQ2 FY2025Q2 FY2024YoY
Paint Stores Group same-store sales4.2%——
Paint Stores Group segment margin24.6%——
Consumer Brands Group adjusted segment margin24.5%——
Performance Coatings Group adjusted segment margin17.3%——
Adjusted EBITDA$1,458.6 million——
Adjusted EBITDA margin21.5%——
Free cash flow conversion86%——
Net operating cash$1,347.5 million——

Management tone

Narrative arc: Q2 FY2025 "softer for longer; doubling restructuring" → Q3 FY2025 "narrowing the guide; demand stabilizing" → Q4 FY2025 "third year of no market help; conservative 2.4% EPS growth guide" → Q1 FY2026 "little to no recovery" → Q2 FY2026 "raising the guide despite continued softness"

The most important shift is the disconnect between the guide raise and the demand commentary. Four quarters ago management was doubling restructuring against a "will continue if not deteriorate" backdrop; three quarters ago the language firmed to a symmetric narrowing; two quarters ago it hardened to "third year of no market help"; last quarter tightened further to "little to no recovery." This quarter management raised both EPS ranges and the revenue growth band while the press release maintains that "customer sentiment and the leading indicators we track point to continued demand softness in the second half." The raise is not being framed as a demand-recovery call — it is a self-help call, powered by pricing (including an announced 8% PSG price increase effective September 1) and operational leverage rather than volume recovery.

The second shift is on Paint Stores execution. This quarter's +4.2% same-store sales is a sharp step up from the +0.8% comparable in Q2 FY2025, and PSG revenue at +5.1% with 24.6% segment margin suggests aggressive pursuit of volume is landing without meaningful pricing giveback, though segment margin is fractionally lower YoY.

The third shift is that gross margin has stopped expanding. Q2 FY2026 at 49.2% is -20bps vs. Q2 FY2025's 49.4% — a slight contraction, and CEO Petz explicitly acknowledged pricing actions were implemented "to offset raw material inflation that pressured our gross margin in the quarter." The EPS raise is landing on operating margin leverage (16.4% vs. 15.6%, +80bps YoY) — SG&A discipline and volume — not on gross margin expansion. If raw materials tighten further in H2, this is the line that breaks first, and the September 1 PSG price increase is management's direct response.

Recurring themes management leaned on this quarter:

Once-in-a-career competitive opportunity amid industry turbulenceAggressive market share gains despite softer-for-longer demandDisciplined cost management and restructuring accelerationPaint Stores Group as growth engine with targeted investmentsSupply chain fixed-cost absorption pressure from volume declinesCompetitor weakness creating share capture opportunity

Risks management surfaced:

Softer-for-longer demand environment with potential for further deterioration in new residential, DIY, and coil coatingsSupply chain inefficiencies from reduced production volumes impacting margins by ~20% of guidance reductionTariff uncertainty affecting coil coatings outlook making it 'murkier'Continued softness in auto refinish due to lower insurance claims and higher premiumsMacroeconomic indicators remaining 'not particularly encouraging' with no expected market help in H2 2025

Answers to last quarter's watch list

Q2 FY2026 revenue landing within "mid-single digit %" — Came in at $6.79B (+7.5% YoY), above the guided band. This is a clean beat.
Resolved positively
Whether the FY guide is narrowed, cut, or raised in the July print — Raised on both counts: GAAP EPS +$0.22 across the range, adjusted EPS +$0.30 across the range, and FY revenue growth shifted from "low to mid" to "mid to high" single digit. This is a clean raise, not a narrowing.
Resolved positively
Net new store cadence resuming — PSG net new stores were -6 in Q2 (and -12 YTD), extending the contraction. SHW is clearly not on a store-expansion trajectory.
Resolved negatively
Paint Stores same-store sales holding up — Came in at +4.2%, a meaningful step up from the +0.8% Q2 FY2025 comparable.
Resolved positively
Gross margin holding 49%+ YoY — Q2 at 49.2% is -20bps vs. Q2 FY2025's 49.4% — a slight contraction. The FY gross margin expansion thesis is now visibly under pressure and management acknowledged raw material inflation as the culprit.
Resolved negatively
Raw material inflation hitting low-single-digit high end vs. moving above the range — CEO Petz explicitly cited "broad-based cost inflation" across raw materials, energy, logistics and packaging, and announced an 8% PSG price increase effective September 1 in response. Raw materials are clearly pushing higher, though the company did not quantify the inflation rate.
Resolved negatively

What to watch into next quarter

Q3 FY2026 revenue landing within "mid to high-single digit %" — implied range ~$6.68B–$6.87B vs. Q3 FY2025's $6.36B. Sub-$6.65B Q3 print would mean the FY revenue guide raise gets tested against a decelerating comp

Gross margin YoY direction in Q3 — Whether Q2's YoY gross margin contraction extends into Q3 is the key tell on whether the FY "gross margin expansion" commitment made in the Q4 FY2025 release holds. The September 1 PSG 8% price increase is the key offset to watch

Whether Paint Stores same-store sales sustains — Q2's +4.2% needs to hold to sustain the share-gain narrative. A drop back toward the low-single-digit range would suggest the Q2 acceleration was a comp effect, not durable share capture

Store count trajectory — PSG net stores were -6 in Q2 and -12 YTD. Watch whether Q3 shows a return to net openings or a third consecutive quarter of contraction, which would confirm the store-expansion narrative is being quietly retired

Q4 FY2026 organic Consumer Brands trajectory — CBG will lap Suvinil starting Q4 FY2026 (deal closed October 1, 2025). Watch the Q3 release for any organic-ex-Suvinil disclosure that would let investors calibrate the underlying trajectory before the lap

Whether the "continued demand softness" language persists into the Q3 print — the tell will be whether management retains the softness framing after two consecutive above-guide revenue quarters, or whether it starts crediting the raise to a firming environment. Retained softness language + retained raise would confirm this is a self-help story; softened language would signal a genuine demand call

Sources

  1. Sherwin-Williams Q2 2026 press release, filed via SEC EDGAR: https://www.sec.gov/Archives/edgar/data/89800/000008980026000046/shwearningsrelease2q2026.htm
  2. Sherwin-Williams Q1 2026 press release (for prior FY guidance baselines): https://www.sec.gov/Archives/edgar/data/89800/000008980026000036/shwearningsrelease1q2026.htm

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