Sherwin-Williams (NYSE:SHW) delivered its 14th consecutive quarter of gross Margin expansion in Q1 2026, beating EPS and Revenue forecasts. Raw material Inflation and Demand softness present near-term headwinds, but the share gain strategy is working.

Key Highlights

  • Sherwin-Williams reported Q1 2026 EPS of $2.35, beating the consensus estimate of $2.27 by 3.52%.
  • Revenue reached $5.67 billion, exceeding expectations of $5.56 billion across all three reportable segments.
  • Gross Margin expanded 90 basis points year-over-year, marking the 14th quarter of expansion in the last 15.
  • Full-year adjusted diluted EPS guidance maintained, with raw material Inflation outlook raised to low to mid-single digits.
  • The company returned $773 million to shareholders through Buybacks and dividends in the quarter.

Consistent Execution in a Difficult Market

Sherwin-Williams (NYSE:SHW) entered 2026 with a familiar combination: end markets that offer little structural support and an internal operating machine that continues to outperform them. Q1 2026 EPS of $2.35 beat consensus by 3.52%, and consolidated Revenue of $5.67 billion exceeded guidance across all three segments. Despite the positive print, SHW shares traded at $324.27, down 3.52% at closing, as investors focused on the escalating raw material cost outlook and Volume guidance that now leans toward a modest decline for the full year.

Segment Performance: Share Gains Across the Board

The Paint Stores Group grew by a mid-single digit percentage, with both price/mix and Volume contributing. Residential repaint returned to mid-single digit growth, commercial was up mid-single digits despite soft completions, and Protective and Marine delivered its seventh consecutive quarter of at least high single-digit growth. New store openings of 21 in the quarter keep the company on track for 80 to 100 net new locations in 2026.

Performance Coatings Group grew slightly above the mid-single digit range management had expected, with growth in every division and region. Automotive Refinish was particularly strong, up low double digits with double-digit Revenue gains across all regions. Packaging grew high single digits against a high single-digit comparison. The growth in both businesses reflects deliberate share gain efforts rather than market tailwinds, with management explicit that underlying Demand in several end markets remains in decline.

Consumer Brands benefited from high-teens growth from the Suvinil Acquisition. Excluding Suvinil, segment sales grew low single digits, driven by high-teens growth in Europe and high single-digit growth in legacy Latin America. North America remained soft, declining low single digits.

Gross Margin: 14 Quarters and Counting

Reported gross Margin expanded 90 basis points year-over-year, including a dilutive impact from the Suvinil consolidation. Excluding Suvinil, Margin expansion would have exceeded 100 basis points. The consistent Margin delivery reflects pricing discipline, Supply chain efficiency, and the structural advantage of Sherwin-Williams' strategic supplier relationships rather than spot buying. Adjusted EBITDA grew at a high single-digit rate, and net operating cash improved by $200 million year-over-year.

Raw Materials: The Dominant Risk

The Middle East conflict has introduced meaningful cost pressure into the raw material outlook. Propylene, which drives approximately 75% of the raw material basket, is forecast to increase further through the remainder of 2026 due to Supply disruptions tied to Strait of Hormuz Volatility. Solvents and epoxies are also elevated. Management raised its full-year raw material Inflation outlook to low to mid-single digits, up from the low single-digit range provided in January.

Importantly, over 80% of consolidated Revenue is generated in North America, where the majority of raw materials are sourced domestically and largely insulated from direct Supply disruption. The inflationary pressure is hitting industrial businesses in Asia-Pacific and EMEA first, with North American architectural businesses beginning to feel it more recently. Management noted that sustained Inflation in these commodities typically takes one to two quarters to flow through the income statement, meaning the second half will bear the heavier burden.

In response, the company has already implemented pricing actions above its initial January guidance, with consolidated price/mix expectations now at the high end of the low single-digit range. Management was clear: if raw material costs escalate further, additional pricing will follow.

Conclusion

Sherwin-Williams enters the remainder of 2026 in a familiar posture, controlling what it can in an environment that offers little help from end markets. The 14-quarter gross Margin expansion streak and consistent share gains across segments reflect the depth of the company's competitive positioning. The second half risk is real. Raw material Inflation is building, Volume assumptions have softened, and the macro backdrop for architectural Demand remains structurally challenged. But Sherwin-Williams has navigated this environment before, and the combination of strategic supplier relationships, surgical pricing discipline, and an aggressive new account focus gives management credible tools to defend the full-year Earnings guidance it has left unchanged.

FAQs

Why did Sherwin-Williams shares fall despite an Earnings beat?

Investors reacted to a raised raw material Inflation outlook and a shift in Volume guidance toward a modest full-year decline, signalling that second-half Margin pressure is building even as Q1 execution was strong.

How is Sherwin-Williams managing rising raw material costs?

The company is leveraging strategic long-term supplier contracts, which provide better pricing visibility than spot purchasing, while implementing targeted price increases by customer, geography, and end market rather than broad across-the-board actions.

What end markets are showing the most resilience for Sherwin-Williams?

Protective and Marine, Automotive Refinish, and Packaging are delivering consistent high single-digit to double-digit growth, driven by share gains rather than underlying market expansion.