Sherwin-Williams Named Top Retail Hardlines Pick by Evercore ISI on Pricing Strength

Evercore ISI has designated Sherwin-Williams (NYSE:SHW) as its top stock pick in the Consumer Retail Broadlines & Hardlines sector, citing the paint manufacturer's robust pricing power and strategic market position. The investment firm assigned an Outperform rating to the stock with a price target of $400.00.

Evercore's Bull Case

In a note to clients, Evercore ISI outlined a constructive outlook on Sherwin-Williams ahead of its third-quarter earnings report on October 27. The firm views the company as its preferred way to gain exposure to the home improvement space, even as the broader sector faces headwinds.

Analysts expect a "relatively straightforward earnings print," with investor focus likely centered on two key areas:

• The degree of price realization from recent price increases.
• The company's strategic path toward its 2027 earnings targets.

Pricing Power and Diversified Markets

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Evercore's thesis hinges on the company's ability to navigate an environment of subdued sales volumes. The firm assumes a roughly 50% realization of the price increase implemented by the Paint Stores Group in September and anticipates that higher raw material costs could justify another price hike in early 2027.

Beyond pricing, Evercore highlighted the resilience of Sherwin-Williams' business model. Approximately 50% of the company's exposure is to industrial and commercial end markets, providing earnings and demand levers that are not solely dependent on a housing market recovery.

Path to Growth Amid Headwinds

While higher interest rates and energy costs create uncertainty for the home improvement sector, Evercore believes Sherwin-Williams is positioned to benefit if rates have peaked. The firm's model projects that the company can achieve double-digit earnings per share (EPS) growth to $13.40 by 2027, even without a significant rebound in housing.

Looking further ahead, Evercore views the stock as the best way to invest in an eventual recovery of the home improvement market, which it speculates could return to a 4% growth rate in 2028.