# Sherwin-Williams (SHW) Financial Model

Free Excel 3-statement financial model and company analysis for Sherwin-Williams.

- Canonical: https://finamodel.com/companies/sherwin-williams
- Industry: Chemicals
- Downloadable model: Yes
- Excel download: https://finamodel.com/company-models/SHW.xlsx

## Model Purpose

This model evaluates the equity valuation and cash flow generation of The Sherwin-Williams Company, allowing an analyst to forecast the impact of raw material cost cycles, housing market dynamics, and strategic acquisitions on the company's three core operating segments.

## Company Overview

- The Sherwin-Williams Company is a global leader in the development, manufacture, distribution, and sale of paint, coatings, and related products to professional, industrial, commercial, and retail customers.
- **Paint Stores Group (PSG)**: ~55-60% of revenue. Operates a controlled-distribution model with over 4,900 company-operated stores primarily in North America, serving professional painters, contractors, and DIYers.
- **Performance Coatings Group (PCG)**: ~25-30% of revenue. Supplies highly engineered solutions for construction, industrial, packaging, and transportation markets globally.
- **Consumer Brands Group (CBG)**: ~12-15% of revenue. Sells branded products (e.g., Valspar, Cabot, Minwax) through mass merchandisers, home centres, and independent dealers.
- **Key geographies**: Primarily North America (driven by the store network), with significant international exposure in Latin America and Europe through the PCG and CBG segments.
- **Business model type**: Vertically integrated manufacturer and retailer. The controlled-distribution store network provides a significant competitive moat.
- **Competitive position**: Market leader in North American architectural paint, competing primarily with PPG Industries, Masco (Behr), and RPM International.
- **Recent major events**: The acquisition of Brazilian coatings manufacturer Suvinil in late 2024/2025, ongoing targeted restructuring actions, and trademark impairments within the CBG and PCG segments.

## Revenue Deep Dive



### Paint Stores Group (PSG)

- **Segment name**: Paint Stores Group
- **Revenue driver formula**: (Beginning Store Count + Net New Stores) x Average Revenue per Store x (1 + Same-Store Sales Growth)
- **Historical growth rate**: 2-7% CAGR (highly dependent on pricing actions and professional architectural volume).
- **Key growth levers and headwinds**: Driven by residential repaint, commercial construction, and protective & marine demand. Headwinds include existing home sales turnover and high interest rates.
- **Pricing dynamics**: Strong pricing power; the company frequently implements structural price increases to offset raw material inflation, which tend to stick even when input costs deflate.
- **Revenue recognition notes**: Recognised at the point of sale in retail stores.
- **Seasonality**: Highly seasonal. The second and third quarters are the strongest due to the summer painting season in North America.

### Consumer Brands Group (CBG)

- **Segment name**: Consumer Brands Group
- **Revenue driver formula**: Volume x Average Selling Price (Price/Mix) + M&A Contribution
- **Historical growth rate**: Flat to low-single digits (historically pressured by DIY demand softness, recently boosted by the Suvinil acquisition).
- **Key growth levers and headwinds**: Heavily reliant on DIY consumer behaviour and inventory destocking/restocking cycles at major retail partners (e.g., Lowe's).
- **Pricing dynamics**: Competitive retail pricing environment; price increases must be negotiated with large big-box retailers.
- **Revenue recognition notes**: Recognised upon shipment or delivery to retail partners.
- **Seasonality**: Peaks in the second and third quarters alongside spring/summer home improvement projects.

### Performance Coatings Group (PCG)

- **Segment name**: Performance Coatings Group
- **Revenue driver formula**: Volume x Average Selling Price (Price/Mix) +/- Foreign Currency Translation
- **Historical growth rate**: 1-4% CAGR.
- **Key growth levers and headwinds**: Driven by industrial production, automotive miles driven (for refinish), and packaging demand. Headwinds include global macroeconomic slowdowns and unfavourable foreign exchange rates.
- **Pricing dynamics**: Contractual and spot pricing, often tied to raw material indices or negotiated on a B2B basis.
- **Revenue recognition notes**: Recognised upon shipment or delivery to industrial customers.
- **Seasonality**: Less seasonal than architectural paint, though slightly heavier in the second half of the year depending on industrial production cycles.

## Cost Structure



### Variable Costs / COGS

- **Line-by-line breakdown**: Raw materials (titanium dioxide / TiO2, petrochemical resins, latex, solvents), packaging materials, direct manufacturing labour, and manufacturing overhead.
- **Gross margin range**: 41% to 49% (recently expanding to 48.5-49.2% due to pricing discipline and moderating raw material costs).
- **Key input costs and commodity exposures**: Highly sensitive to crude oil derivatives (resins, solvents) and titanium dioxide.
- **How COGS scales with revenue**: Step-function based on manufacturing plant utilisation, but highly dependent on the lag between raw material spot prices and inventory flow-through (FIFO/LIFO accounting impacts).

### Operating Expenses

- **R&D**: Typically ~1% of revenue, expensed as incurred, covering formulation improvements and new product development.
- **SG&A**: The largest operating expense, running at 28-30% of revenue. Heavily driven by the fixed and semi-variable costs of operating over 4,900 retail stores (rent, store associate payroll, distribution fleet) and corporate overhead.
- **Depreciation & Amortisation**: Typically 2-3% of revenue. Includes significant acquisition-related amortisation of intangible assets (from Valspar and Suvinil).
- **Stock-Based Compensation**: Less than 1% of revenue, standard corporate equity plans.
- **Restructuring / one-time charges**: Frequent in recent years, including severance, facility closures, and trademark impairments (e.g., $17.8 million trademark impairment in Q4 2025).

### Margin Profile

- **Gross margin**: 45-49%.
- **EBITDA margin**: 17-20% (Adjusted EBITDA margin recently ~19.4%).
- **Operating margin**: 14-16%.
- **Net margin**: 10-12%.
- **Segment-level margins**: PSG is the most profitable (segment margin 20-25%), followed by PCG (14-16%), and CBG (10-14%, heavily impacted by recent restructuring).

## Balance Sheet Structure

- **Total assets**: Approximately $22-24 billion.
- **Key asset categories**: Inventory, Accounts Receivable, PP&E, Operating Lease Right-of-Use Assets, Goodwill, and Intangible Assets.
- **Goodwill & intangibles as % of total assets**: Very high (typically 40-50% of total assets) due to the transformational Valspar acquisition in 2017 and recent bolt-ons like Suvinil.
- **Working capital profile**:
  - **Days Sales Outstanding (DSO)**: 45-55 days.
  - **Days Inventory Outstanding (DIO)**: 65-75 days (requires significant raw material and finished goods buffering).
  - **Days Payable Outstanding (DPO)**: 75-85 days.
  - **Net working capital as % of revenue**: 8-10%.
  - **Is working capital positive or negative?**: Positive. The company uses cash to fund working capital during its seasonal build-up in the first quarter.
- **PP&E**: Manufacturing plants, distribution centres, and store fixtures. Useful lives range from 3-10 years for machinery/fixtures to 10-40 years for buildings.
- **Right-of-use assets / operating leases**: Highly material. The company leases almost all of its 4,900+ retail stores, resulting in billions in operating lease liabilities and corresponding ROU assets.

## Capital Expenditure & Investment

- **Capex as % of revenue**: 2.0-2.5%.
- **Maintenance capex vs. growth capex**: Approximately 60% maintenance (plant upkeep, IT) and 40% growth (new store openings, plant expansions).
- **Major capex programmes underway or planned**: Ongoing investments in the new global headquarters and R&D centre in Ohio, plus 50-100 net new store openings annually.
- **Capitalised software / development costs**: Minimal relative to physical infrastructure.
- **M&A pattern**: Transformational acquirer historically (Valspar), currently focused on strategic bolt-ons (e.g., Suvinil in Latin America, European industrial coatings).
- **Typical acquisition multiple paid**: 11x-15x EV/EBITDA for high-quality coatings assets.

## Debt & Capital Structure

- **Total debt**: Approximately $8-10 billion.
- **Debt/EBITDA ratio**: Current ~2.0x, target range is 2.0x to 2.5x.
- **Credit rating**: BBB (S&P) / Baa2 (Moody's).
- **Key debt instruments**: Senior notes (bonds) of varying maturities, commercial paper programme for seasonal working capital, and a revolving credit facility.
- **Maturity profile**: Well-laddered bond maturities stretching out 10-30 years.
- **Interest rate profile**: Predominantly fixed-rate senior notes; commercial paper is floating.
- **Covenants**: Standard leverage and interest coverage covenants on the revolving credit facility; plenty of headroom.
- **Share repurchase programme**: Highly active. Repurchased 4.8 million shares in 2025 (returning ~$2.45 billion to shareholders combined with dividends).
- **Dividend policy**: Consistent dividend grower (over 40 consecutive years of increases). Payout ratio is typically 25-30% of net income.

## Cash Flow Characteristics

- **Operating cash flow conversion**: Excellent. OCF / Net Income is typically 1.2x to 1.4x.
- **Free cash flow margin**: 11-13% of revenue.
- **Major non-cash items that bridge net income to OCF**: Depreciation, acquisition-related amortisation (very significant), trademark impairments, and deferred taxes.
- **Working capital cash flow impact**: Seasonal use of cash in Q1, significant source of cash in Q3 and Q4 as inventory is sold down.
- **Capex intensity**: Low capital intensity (2-3% of sales), allowing for massive free cash flow generation.
- **Cash tax rate vs. GAAP effective tax rate**: Cash taxes generally track the GAAP effective tax rate of ~21-23%, with minor timing differences from accelerated depreciation.

## Sheet Structure

1. **Assumptions**: Hardcoded drivers for macroeconomic indicators, raw material inflation, segment growth rates, store openings, and margin targets.
2. **Revenue Build**: Detailed schedules for PSG (store count x revenue per store), CBG (volume/price mix), and PCG (volume/price mix), rolling up to consolidated net sales.
3. **Income Statement**: Consolidated GAAP income statement mirroring the 10-K, including Cost of Goods Sold, SG&A, Amortisation, Impairments, and Interest Expense.
4. **Segment Profitability**: Reconciliation of Segment Profit to Adjusted Segment Profit (adding back acquisition-related amortisation and restructuring costs).
5. **Balance Sheet**: Standard assets, liabilities, and equity, with specific breakouts for Operating Lease ROU Assets and Goodwill.
6. **Working Capital Schedule**: DSO, DIO, and DPO calculations driving Accounts Receivable, Inventory, and Accounts Payable.
7. **PP&E and Intangibles**: Capex, depreciation waterfall, and a specific schedule for the run-off of acquisition-related amortisation.
8. **Debt Schedule**: Tranches of senior notes, commercial paper balance, interest expense calculation, and mandatory repayments.
9. **Cash Flow Statement**: Indirect method starting from Net Income, adjusting for non-cash items, working capital changes, capex, dividends, and share repurchases.
10. **DCF Valuation**: Unlevered free cash flow calculation, WACC assumptions, terminal value, and implied share price.

## Key Financial Relationships

1. `PSG Revenue = (Prior Year Store Count + Net New Stores) * Prior Year Revenue Per Store * (1 + Same-Store Sales Growth)`
2. `CBG Revenue = Prior Year CBG Revenue * (1 + CBG Organic Volume Growth + CBG Price/Mix + M&A Impact)`
3. `PCG Revenue = Prior Year PCG Revenue * (1 + PCG Organic Volume Growth + PCG Price/Mix + FX Translation Impact)`
4. `Consolidated Net Sales = PSG Revenue + CBG Revenue + PCG Revenue`
5. `Cost of Goods Sold = Consolidated Net Sales * (1 - Gross Margin %)`
6. `Gross Profit = Consolidated Net Sales - Cost of Goods Sold`
7. `SG&A Expense = Consolidated Net Sales * SG&A % of Sales`
8. `Reported Segment Profit = Segment Revenue - Segment COGS - Segment Direct SG&A`
9. `Adjusted Segment Profit = Reported Segment Profit + Acquisition-Related Amortisation + Restructuring/Impairment Charges`
10. `Adjusted Diluted EPS = (Net Income + After-Tax Acquisition Amortisation + After-Tax Restructuring) / Diluted Shares Outstanding`
11. `Operating Lease Liability = Present Value of Future Minimum Lease Payments for Store Network`
12. `Free Cash Flow = Net Operating Cash - Capital Expenditures`

## Cross-Sheet Dependencies

- The **Assumptions** sheet dictates the growth and margin profiles in the **Revenue Build** and **Income Statement**.
- The **Revenue Build** feeds the top line of the **Income Statement** and drives the **Working Capital Schedule** (AR, AP, Inventory).
- The **Income Statement** generates Net Income, which is the starting point for the **Cash Flow Statement**.
- The **PP&E and Intangibles** sheet calculates D&A, which feeds both the **Income Statement** (operating expenses) and the **Cash Flow Statement** (non-cash add-backs).
- The **Cash Flow Statement** determines the ending cash balance or required revolver draw, feeding the **Debt Schedule** and the **Balance Sheet**.
- A circularity exists between the **Debt Schedule** (Interest Expense) and the **Income Statement** (Net Income), which impacts cash flow and debt balances. This should be managed with a circuit breaker toggle.

## Sign Convention

- **Revenue and Assets**: Entered and displayed as positive numbers.
- **Expenses (COGS, SG&A, Interest, Taxes)**: Entered as positive numbers in their specific build schedules, but subtracted in aggregate formulas (e.g., Gross Profit = Revenue - COGS).
- **Liabilities and Equity**: Entered and displayed as positive numbers.
- **Cash Flow Statement**: Inflows (sources of cash) are positive; outflows (uses of cash, such as capex, dividends, and share repurchases) are negative.

## Things Most Likely to Go Wrong

- **Mismodelling acquisition-related amortisation**: Sherwin-Williams has roughly $0.80 per share of acquisition-related amortisation annually. Failing to add this back will severely understate Adjusted EPS, which is the metric management and Wall Street focus on.
- **Ignoring the store network operating leverage**: PSG margins expand rapidly when same-store sales are positive due to the fixed costs of the store network. Linear margin assumptions will miss this dynamic.
- **Foreign currency translation impacts**: CBG and PCG have significant international exposure. FX can swing reported revenue by 1-3% YoY; the model must separate organic growth from FX impacts.
- **Misunderstanding the Suvinil acquisition**: Acquired in late 2024/2025, this adds inorganic growth to CBG and PCG. Historical growth rates for these segments must be adjusted to account for this new baseline.
- **Working capital seasonality**: If modelling quarterly, failing to build inventory in Q1 and release it in Q3/Q4 will result in inaccurate cash flow timing and commercial paper borrowing estimates.
- **Trademark impairments**: The company frequently takes non-cash trademark impairments during restructuring (e.g., $17.8 million in Q4 2025). These must be excluded from adjusted operating metrics.
- **Lease accounting**: With over 4,900 stores, operating lease liabilities are massive. Ensure ROU assets and lease liabilities are properly amortised and do not distort the debt-to-EBITDA covenant calculations.
- **Raw material lag**: Gross margins do not react instantly to spot oil or TiO2 prices due to FIFO inventory accounting. There is typically a 3-6 month lag before cost changes hit the P&L.

## Validation Checks

- "Gross margin should be in the 45-50% range; flag if outside this band as it implies unrealistic raw material or pricing assumptions."
- "SG&A as a % of sales should remain between 28-30%; flag if it drops below 28% as store fixed costs make this highly unlikely."
- "OCF/Net Income conversion should be >1.1x; flag if lower, as the company has structurally strong cash conversion."
- "Adjusted EPS must be higher than GAAP EPS by approximately $0.75-$0.85 due to acquisition amortisation."
- "Balance sheet must balance: Total Assets = Total Liabilities + Equity in every period."
- "Net new store openings should be between 50 and 100 per year; flag if the model assumes aggressive retail expansion beyond historical norms."
- "Effective tax rate should be 21-23%; flag if outside this range."
- "Dividend payout ratio should remain within 25-35% of net income based on stated management policy."

## Key Assumptions (Default Values)

| Assumption | Default Value | Unit | Rationale |
|---|---|---|---|
| PSG Net New Stores | 75 | Stores | Historical average annual store openings |
| PSG Same-Store Sales Growth | 2.5 | % | Blended average of price increases and flat/slight volume growth |
| CBG Organic Revenue Growth | 1.0 | % | Soft DIY demand offset by minor pricing actions |
| PCG Organic Revenue Growth | 2.0 | % | Low-single-digit industrial production growth |
| Gross Margin | 48.5 | % | Reflects recent 2024/2025 margin expansion from pricing and raw material stability |
| SG&A % of Sales | 29.0 | % | Historical average reflecting fixed store costs and recent restructuring savings |
| Acquisition Amortisation | 0.80 | $/Share | Management guidance for 2026 amortisation impact |
| Effective Tax Rate | 22.0 | % | Standard US corporate rate plus state/local and international mix |
| Capex % of Sales | 2.5 | % | Historical average for maintenance and new store build-outs |
| Days Sales Outstanding (DSO) | 50 | Days | Based on historical AR balances |
| Days Inventory Outstanding (DIO) | 70 | Days | Based on historical inventory requirements |
| Days Payable Outstanding (DPO) | 80 | Days | Based on historical supplier payment terms |
| Share Repurchases | 2,000 | $ Millions | Consistent with recent capital return policies |
| Dividend Payout Ratio | 30.0 | % | Stated management target |
| WACC | 8.0 | % | Standard discount rate for a large-cap, stable materials company |
| Terminal Growth Rate | 2.5 | % | Long-term GDP and inflation expectations |

## Data Sources & Benchmarks

- **Filings**: SEC EDGAR (10-K, 10-Q, 8-K), Sherwin-Williams Investor Relations page (Earnings Presentations, Financial History Excel downloads).
- **Key peers for benchmarking**: PPG Industries (PPG), Masco Corporation (MAS), RPM International (RPM), AkzoNobel (AKZA.AS).
- **Industry data sources**: American Chemistry Council (ACC) for resin and chemical data, US Census Bureau for housing starts and existing home sales, TZMI for titanium dioxide pricing.
- **Consensus estimates source**: FactSet or Bloomberg for forward-looking EPS and revenue consensus.
- **Proprietary data**: Credit card data panels for DIY retail foot traffic (Home Depot/Lowe's), Dodge Construction Network for commercial construction starts.

## Sources

- The Sherwin-Williams Company 2024 and 2025 Earnings Releases (January 2025 and January 2026).
- The Sherwin-Williams Company 2024 Annual Report and 10-K.
- Sherwin-Williams Investor Relations Presentations (2025/2026 Guidance).
- PCI Magazine: "Sherwin-Williams Points to Record Results as Demand Remains Uneven" (January 2026).
- European Coatings: "Sherwin-Williams reports record sales for 2025 amid challenging market dynamics" (February 2026).

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## Frequently asked questions

### What is Sherwin-Williams' primary business model and what products does it offer?

The Sherwin-Williams Company is a global leader in the development, manufacture, distribution, and sale of paint, coatings, and related products. It operates a vertically integrated business model, serving a wide range of professional, industrial, commercial, and retail customers.

### How does Sherwin-Williams generate its revenue across its different segments?

Sherwin-Williams generates a majority of its revenue through its Paint Stores Group, which operates over 4,900 company-owned stores primarily in North America. Additional revenue comes from its Performance Coatings Group, supplying highly engineered solutions globally, and its Consumer Brands Group, which sells branded products through mass merchandisers and home centers.

### What is a key assumption for capital expenditures in the Sherwin-Williams financial model?

A key assumption in the financial model for Sherwin-Williams is that capital expenditures represent approximately 2.4% of revenue. This allocation supports both maintenance activities, such as plant upkeep and IT, and growth initiatives like new store openings and plant expansions.

### What factors are considered when evaluating the equity valuation of Sherwin-Williams?

The financial model evaluates Sherwin-Williams' equity valuation and cash flow generation by forecasting the impact of several key factors. These include raw material cost cycles, dynamics within the housing market, and the effects of strategic acquisitions on the company's operating segments.

### Can I download an Excel financial model for Sherwin-Williams?

Yes, an Excel financial model for The Sherwin-Williams Company (SHW) is available for download. This model provides a detailed forecast horizon spanning from fiscal year 2026 through fiscal year 2030.

### What is the significance of goodwill and intangible assets on Sherwin-Williams' balance sheet?

Goodwill and intangible assets are highly material for Sherwin-Williams, typically accounting for 40-50% of its total assets. This significant proportion is primarily a result of major acquisitions, such as the transformational Valspar acquisition in 2017 and subsequent strategic bolt-on deals.

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